1116 forma utasítás
A 1116-os formanyomtatvány, a külföldi adóhitel (egyéni, Estate vagy Trust)
Rev. 2023
Kapcsolódó űrlapok
- Forma 1116 - Külföldi adóhitel (Egyéni, Estate vagy Trust)
Department of the Treasury
Internal Revenue Service
2023
Instructions for Form 1116
Foreign Tax Credit
(Individual, Estate, or Trust)
Section references are to the Internal Revenue Code unless
otherwise noted.
2023-32 I.R.B. 427, available at IRS.gov/irb/
I.R.B. 1583, available at IRS.gov/irb/
Contents
Page
Election To Claim the Foreign Tax Credit
Reminders
Alternative minimum tax. In addition to your regular income
tax, you may be liable for the alternative minimum tax. A
foreign tax credit may be allowed in figuring this tax. See the
Instructions for Form 6251, Alternative Minimum
Tax—Individuals, or the Instructions for Schedule I (Form
1041), Alternative Minimum Tax—Estates and Trusts, for a
discussion of the alternative minimum tax foreign tax credit.
Income From Sources Outside the United
More Information
For more information about, or assistance with, figuring the
foreign tax credit, the following IRS resources are available.
Foreign Qualified Dividends and Capital
Publications. See Pub. 514, Foreign Tax Credit for
Individuals. The following publications may also be helpful.
Pub. 54, Tax Guide for U.S. Citizens and Resident Aliens
•
Abroad.
Part I—Taxable Income or Loss From Sources
Pub. 519, U.S. Tax Guide for Aliens.
•
•
Pub. 570, Tax Guide for Individuals With Income From U.S.
Territories.
If you are overseas, call 267-941-1000 (not toll free).
Part IV—Summary of Credits From Separate
Write to: Internal Revenue Service, International
Accounts, Philadelphia, PA 19255-0725
Future Developments
For the latest information about developments related to
Form 1116 and its instructions, such as legislation enacted
General Instructions
What’s New
New checkbox on line 10. If you enter an amount on
line 10, there is a new checkbox for you to indicate that you
don't need to attach Schedule B (Form 1116). See the
Election To Claim the Foreign Tax
Credit Without Filing Form 1116
You may be able to claim the foreign tax credit without filing
Form 1116. By making this election, the foreign tax credit
limitation (lines 15 through 23 of the form) won't apply to you.
This election is available only if you meet all of the following
conditions.
Final foreign tax credit regulations. Final foreign tax
credit regulations were published January 4, 2022. The new
regulations made changes to the rules relating to the
creditability of foreign taxes under sections 901 and 903, the
applicable period for claiming a credit or deduction for foreign
taxes, and the new election to claim a provisional credit for
contested foreign taxes. A Notice was subsequently released
on July 21, 2023, allowing taxpayers to apply prior rules in
place of certain rules provided in the new regulations. The
rules described in this Notice were modified in part by a
Notice released on December 11, 2023, to address their
application to partnerships and their partners and to extend
the relief period until further notice. For more information, see
Treasury Decision 9959, 2022-03 I.R.B. 328, available at
IRS.gov/irb/2022-03_IRB#TD-9959; Notice 2023-55,
All of your foreign source gross income was “passive
•
category income” (which includes most interest and
for this purpose, passive income also includes (a) income
later; and (b) certain export financing interest.
All the income and any foreign taxes paid on it were
•
reported to you on a qualified payee statement. Qualified
payee statements include Form 1099-DIV, Form 1099-INT,
Schedule K-1 (Form 1041), Schedule K-3 (Form 1065),
Schedule K-3 (Form 1120-S), or similar substitute
statements.
Dec 28, 2023
Cat. No. 11441F
Your total creditable foreign taxes aren't more than $300
•
Credit or Deduction
($600 if married filing a joint return).
Instead of claiming a credit for eligible foreign taxes, you can
choose to deduct foreign income taxes. Form 1040 or
1040-SR filers choosing to do so would deduct foreign
income taxes on Schedule A (Form 1040), Itemized
Deductions. Generally, if you take the credit for any eligible
foreign taxes, you can't take any part of that year's foreign
taxes as a deduction. However, even if you take the credit for
eligible foreign taxes for the year, you can take a deduction
for the following.
This election isn't available to estates or trusts.
If you make this election, the following rules apply.
You can't carry over to or from any other year any foreign
•
taxes paid or accrued in a tax year to which the election
applies (but carryovers to and from other years are
You are still required to take into account the general rules
•
for determining whether a tax is creditable. See Foreign
Credit, later.
Foreign taxes not allowed as a credit because of boycott
•
provisions.
Taxes paid to certain foreign countries for which a credit
•
You are still required to reduce the taxes available for credit
•
Not Eligible for a Credit, later.
by any amount you would have entered on line 12 of Form
Taxes on income or gain that aren't creditable because you
•
To make the election, just enter on the foreign tax credit
line of your tax return (for example, Schedule 3 (Form 1040),
Part I, line 1) the smaller of (a) your total foreign tax, or (b)
to figure your regular tax.
don't meet the holding period requirement, as described in
Taxes on income or gain that aren't creditable because you
•
have to make related payments, as described in item 6 or 8
Certain taxes paid or accrued to a foreign country in
•
Purpose of Form
connection with the purchase or sale of oil or gas extracted in
Eligible for a Credit, later.
Who should file. File Form 1116 to claim the foreign tax
Taxes on income or gain that aren't creditable because
•
You are an individual, estate, or trust; and
•
they were paid or accrued in connection with a covered asset
Eligible for a Credit, later.
You paid or accrued certain foreign taxes to a foreign
•
country or U.S. possession.
if the taxes you paid or accrued qualify for the credit.
Don't use Form 1116 to figure a credit for taxes paid to the
U.S. Virgin Islands. Instead, use Form 8689, Allocation of
Individual Income Tax to the U.S. Virgin Islands.
If you are an accrual basis taxpayer or if you elected to
•
claim your foreign tax credit on an accrual basis, taxes paid
that relate to a prior tax year in which you elected to claim a
deduction instead of a credit in that prior year. See
Regulations section 1.901-1(c)(3).
Nonresident aliens. If you are a nonresident alien, you
generally can't take the credit. However, you may be able to
take the credit if:
You may make an election to claim a credit or to change
from claiming a deduction to claiming a credit at any time
before the end of a special 10-year limitation period
described in section 6511(d)(3) (or section 6511(c) if the
period is extended by agreement). You may make an election
to claim a deduction or to change from claiming a credit to
claiming a deduction at any time before the end of the
standard 3-year limitation period described in section
6511(a) (or section 6511(c) if the period is extended by
agreement). See Regulations section 1.901-1(d) and Pub.
514 for more information.
You were a resident of Puerto Rico during your entire tax
•
year, or
You pay or accrue tax to a foreign country or U.S.
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possession on income from foreign sources that is effectively
connected with a trade or business in the United States. But
if you must pay tax to a foreign country or U.S. possession on
income from U.S. sources only because you are a citizen or a
resident of that country or U.S. possession, don't use that tax
in figuring the amount of your credit.
See section 906 for more information on the foreign tax
Foreign Taxes Eligible for a Credit
credit allowed to a nonresident alien individual.
You can take a credit for income, war profits, and excess
profits taxes paid or accrued during your tax year to any
foreign country or U.S. possession, or any political
Separate Schedules and Forms
Use Schedule B (Form 1116) to reconcile your prior year
•
subdivision (for example, city, state, or province) of the
country or possession. This includes taxes paid or accrued in
lieu of a foreign or possession income, war profits, or excess
profits tax that is otherwise generally imposed. For purposes
of the credit, U.S. possessions include Puerto Rico, the U.S.
Virgin Islands, Guam, the Northern Mariana Islands, and
American Samoa. See Pub. 514 for more information on what
foreign taxes qualify for the credit.
foreign tax carryover with your current year foreign tax
carryover. See Schedule B (Form 1116) and its instructions,
Use Schedule C (Form 1116) to report foreign tax
•
redeterminations that occurred in the current tax year and
that relate to prior tax years. See Schedule C (Form 1116)
for more information.
Use Form 7204 to consent to extend the time to assess tax
•
U.S. citizens living in certain treaty countries may be able
to take an additional foreign tax credit for foreign tax imposed
on certain items of income from the United States. See Tax
Treaties in Pub. 514 for details. If this applies to you, use the
worksheet near the end of Pub. 514 to help you figure this
additional credit.
related to contested foreign income taxes, if you are electing
to claim a provisional foreign tax credit for the contested
foreign income taxes.
2
Instructions for Form 1116 (2023)
If you make the election under section 962 to be taxed at
corporate rates on the amount you must include in gross
income under sections 951(a) and 951A(a) from your
controlled foreign corporations (CFCs), you can claim the
credit based on your share of foreign taxes paid or accrued
by the CFC. If you make this election, you must claim the
credit by filing Form 1118. You must also still file Form 1116
to claim the credit for other foreign taxes you paid or
accrued. For more information on how to complete your
Form 1116 and Form 1118 when making this election, see
sections 960 and 962 and Pub. 514.
claim a foreign tax credit for the withholding tax on these
dividends.
7. Foreign taxes withheld on income or gain (other than
dividends) from property if you haven't held the property for at
least 16 days within the 31-day period that begins 15 days
before the date on which the right to receive the payment
arises. See section 901(l) or Pub. 514.
8. Foreign taxes withheld on income or gain (other than
dividends) from property to the extent you have to make
related payments on positions in substantially similar or
related property.
Foreign Taxes Not Eligible for a Credit
9. Foreign taxes that are used to provide, directly or
indirectly, a subsidy to you, a person or business related to
you, or any party transacting with you.
10. Taxes paid or accrued to a foreign country in
connection with the purchase or sale of oil or gas extracted in
that country if you don't have an economic interest in the oil
or gas, and the purchase price or sales price is different from
the fair market value of the oil or gas at the time of the
purchase or sale.
You can't take a credit for the following foreign taxes.
1. Taxes paid to a foreign country that you don't legally
owe, including amounts eligible for refund by the foreign
country. If you don't exercise your available remedies to
reduce the amount of foreign tax to what you legally owe, a
credit for the excess amount isn't allowed. The amount of tax
actually withheld by a foreign country isn't necessarily 100%
creditable. See Regulations section 1.901-2(e)(2)(i).
11. Foreign taxes paid or accrued on income for which you
are claiming an exclusion on Form 8873, Extraterritorial
Income Exclusion. However, see section 943(d) for an
exception for certain withholding taxes.
12. The disqualified portion of any foreign tax paid or
accrued in connection with a covered asset acquisition.
Covered asset acquisitions include certain acquisitions that
result in a stepped-up basis for U.S. tax purposes. For more
information, see section 901(m) and the regulations under
that section, including Treasury Decision 9895, 2020-15
Example. Country X withholds $25 of tax from a payment
made to you. Under the income tax treaty between the United
States and Country X, you owe only $15 and can claim a
refund from Country X for the other $10. Only $15 is eligible
for the foreign tax credit (whether or not you apply for a
refund).
2. Taxes paid to a foreign country that are offset or
reduced by a tax credit. This includes foreign taxes offset or
reduced by a tax credit that is refundable to you in cash only
if an excess credit remains after offsetting your foreign
income tax liability as well as a tax credit purchased from
another taxpayer. See Regulations section 1.901-2(e)(2)(ii).
However, if the foreign income taxes are offset or reduced by
a tax credit that is fully refundable to you in cash at your
option, without having to first offset your foreign income tax
liability, you can claim a foreign tax credit against your U.S.
income tax for those foreign taxes. See Regulations section
1.901-2(e)(2)(iii).
13. Foreign taxes disallowed under section 965(g) and
Regulations section 1.965-5.
You can't take a credit for any interest or penalties you
must pay.
For more information, see Foreign Taxes for Which You
Cannot Take a Credit in Pub. 514.
3. Taxes imposed by a foreign country only because you
could claim a foreign tax credit against the U.S. tax liability for
such foreign income taxes paid or accrued.
Foreign Currency Conversion
Report all amounts in U.S. dollars except where specified
currency, attach a detailed explanation of how you figured the
conversion rate.
4. Taxes imposed by and paid to certain foreign
countries. These countries are those designated by the
Secretary of State as countries that repeatedly provide
support for acts of international terrorism, countries with
which the United States doesn't have or doesn't conduct
diplomatic relations, or countries whose governments aren't
recognized by the United States and aren't otherwise eligible
to purchase defense articles or services under the Arms
Export Control Act. Pub. 514 contains a list of these
countries.
If you take a credit for taxes paid, the conversion rate is the
rate of exchange in effect on the day you paid the foreign
taxes (or on the day the tax was withheld). If you receive a
refund of foreign taxes paid, the conversion rate is the rate in
effect when you paid the taxes, not when you receive the
refund.
If you choose to account for foreign income taxes on an
accrual basis, you must generally use the average exchange
rate for the tax year to which the taxes relate. However, you
can't do so if any of the following apply.
5. Foreign taxes withheld on a dividend from a
corporation, if you haven't held the stock for at least 16 days
within the 31-day period that begins 15 days before the
ex-dividend date. This required holding period is greater for
preferred-stock dividends attributable to periods totaling
more than 366 days. See section 901(k)(3) or Pub. 514.
1. The foreign taxes are actually paid more than 2 years
after the close of the tax year to which they relate.
6. Foreign taxes withheld on a dividend to the extent that
you have to make related payments on positions in
substantially similar or related property.
Example. You receive a dividend subject to foreign
withholding tax. You are obligated to pay someone else an
amount equal to all these dividends you receive. You can't
2. The foreign taxes are actually paid in a tax year prior to
the year to which they relate.
3. The foreign tax liability is denominated in any
inflationary currency.
Accrued foreign taxes not eligible for conversion at the
yearly average exchange rate must be converted using the
3
Instructions for Form 1116 (2023)
exchange rate on the date of payment of the tax. However,
accrued but unpaid foreign taxes denominated in inflationary
currency must be translated into U.S. dollars using the
exchange rate on the last day of the U.S. tax year to which
those taxes relate.
5. There is a change in foreign tax liability that affects the
amount of distributions or inclusions under section 951,
951A, or 1293, or affects the application of the high-tax
exception described in section 954(b)(4).
6. For taxes taken into account when accrued but
translated into dollars on the date of payment, the dollar
value of the accrued tax differs from the dollar value of the tax
paid because of fluctuations in the exchange rate between
the date of accrual and the date of payment. However, no
redetermination is required if the change in foreign tax liability
for each foreign country is solely attributable to exchange rate
fluctuation and is less than the smaller of:
Inflationary currency. Inflationary currency means the
currency of a country in which there is cumulative inflation
during the 36 calendar months immediately preceding the
last day of the tax year of at least 30%, as determined by
reference to the consumer price index of the country listed in
the monthly issues of International Financial Statistics, or a
successor publication, of the International Monetary Fund.
a. $10,000, or
Election to use exchange rate on date paid. If you have
accrued foreign taxes that you are otherwise required to
convert using the average exchange rate, you can elect to
use the exchange rate in effect on the date the foreign taxes
are paid if the taxes are denominated in a nonfunctional
foreign currency. If any of the accrued taxes are unpaid, you
must translate them into U.S. dollars using the exchange rate
on the last day of the U.S. tax year to which those taxes
relate. Once made, the election applies to the tax year for
which made and all subsequent tax years unless revoked
with the consent of the IRS. It must be made by the due date
(including extensions) for filing the tax return for the first tax
year to which the election applies. Make the election by
attaching a statement to the applicable tax return.
b. 2% of the total dollar amount of the foreign tax initially
accrued for that foreign country for the U.S. tax year.
In this case, you must adjust your U.S. tax in the tax year in
which the accrued foreign taxes are paid.
Reporting requirements. If any of the above foreign tax
redeterminations occur after you file your tax return, and the
foreign tax redeterminations change the amount of U.S. tax
due for any tax year, you must generally file Form 1040-X,
Amended U.S. Individual Income Tax Return, or other
amended return, to notify the IRS so that your U.S. tax for the
year or years affected can be redetermined. If you have a
foreign tax redetermination that results in an increase in your
U.S. tax liability for any year, note in the explanation of
changes section of your amended tax return (for example,
Form 1040-X, Part II), “This amended return and Form 1116
are for a change in foreign tax credit that increases U.S. tax
liability.” Complete and attach to Form 1040-X (or other
amended return) a revised Form 1116 for the tax year(s)
affected and a statement that contains information sufficient
for the IRS to redetermine your U.S. tax liability. In some
cases, you may not have to file Form 1040-X or attach Form
1116. See Pub. 514 for more information, including
Special rules for a qualified business unit (QBU). If you
have a QBU, see Pub. 514 for special rules for converting
foreign income and taxes into U.S. dollars. You may have a
QBU if you own and operate a business or are self-employed
in a foreign country.
Foreign Tax Redeterminations
If you claim a credit for foreign taxes paid, and you receive a
refund of all or part of those taxes in a later year, you must file
an amended return reducing the taxes credited by the
amount refunded.
exceptions. An increase in your U.S. tax liability as a result of
a foreign tax redetermination is excepted from the general
statute of limitations against assessment and collection. See
sections 6501(c)(5) and 905(c).
Schedule C (Form 1116). In addition to filing an amended
return with Form 1116 and attached statement for your tax
year(s) for which your U.S. tax liability is changed as a result
of the foreign tax redetermination, you must file Schedule C
(Form 1116) with your current year tax return summarizing
the foreign tax redeterminations that occurred that year that
relate to prior tax years. You must file Schedule C (Form
1116) for each applicable separate category of income.
If you claim the foreign tax credit based on foreign taxes
accrued instead of foreign taxes paid, your foreign tax credit
and U.S. tax liability must be redetermined in any of the
following situations (foreign tax redeterminations).
1. Your accrued taxes when paid differ from the amount
you claimed as a credit (including corrections to accrued tax
amounts to reflect final foreign tax liability and additional tax
you pay after the close of the tax year to which the tax
relates).
2. You don't pay the accrued taxes within 24 months after
If a foreign tax redetermination doesn't change the amount
of U.S. tax due for any tax year, you don't need to file an
amended return and may instead notify the IRS of the
redetermination by attaching for each applicable separate
category of income a completed Schedule C (Form 1116) to
the original return for your tax year in which the foreign tax
redetermination occurs. See the Instructions for Schedule C
(Form 1116) for additional information.
Contested foreign income tax liability. In general, you
can’t claim a credit for a contested foreign income tax liability
until the contest is resolved and the amount of the liability is
finally determined.
the close of the tax year to which they relate.
If this applies to you, you must reduce the credit previously
claimed by the amount of the unpaid taxes. You won't be
allowed a credit for the unpaid taxes until you pay them.
When you later pay the accrued taxes, a new tax
redetermination occurs and you must translate the taxes into
U.S. dollars using the exchange rate as of the date they were
paid. The foreign tax credit is allowed for the year to which
earlier.
3. After you pay the accrued taxes, you receive a full or
partial refund of them.
4. You change your election and claim a foreign tax credit
for foreign income taxes that you previously deducted, or you
change your election and claim a deduction for foreign
income taxes that you previously credited.
If you use the cash method of accounting, you can’t claim
a credit for a contested foreign income tax liability (or any
portion of it) that has been remitted to the foreign country
until the contest is resolved and the tax is considered paid for
4
Instructions for Form 1116 (2023)
purposes of section 901. You can claim a credit once the
contest is resolved and the foreign income tax liability is
finally determined. The tax is considered paid in the tax year
in which the payment was made. See Regulations section
1.905-1(c)(2). Alternatively, you can elect to claim a
provisional credit for contested taxes, as described later.
If you don't notify the IRS of a foreign tax refund or
change in the dollar amount of foreign taxes paid or
accrued, you will have to pay a penalty unless you
!
CAUTION
can show that the failure to notify the IRS is due to
reasonable cause and not due to willful neglect.
Income From Sources Outside the
United States
If you elected the accrual method of accounting for
claim a credit for a contested foreign income tax liability (or
any portion of it) that has been remitted to the foreign country
until the contest is resolved and the tax is considered paid for
purposes of section 901. You can claim a credit once the
contest is resolved and the foreign income tax liability is
finally determined and paid. The tax is considered to accrue
in the foreign tax year to which the contested foreign income
tax liability is related (“relation-back year”). See Regulations
section 1.905-1(d)(3). Alternatively, you can elect to claim a
provisional credit for contested taxes. See the next paragraph
for details.
Election to claim a provisional credit for contested tax-
es. If you use the cash method of accounting, you may elect
to claim a credit for a contested foreign income tax liability (or
any portion of it) in the tax year you pay the contested
amount (or any portion of it) to the foreign country, even
though the liability isn’t finally determined and isn’t
Foreign source income generally includes, but isn't limited to,
the following.
Compensation for services performed outside the United
•
States.
Interest income from a payer located outside the United
•
States.
Dividends from a corporation incorporated outside the
•
United States.
Subpart F income inclusions and section 951A category
•
income inclusions.
Gain on the sale of nondepreciable personal property you
•
sold while maintaining a tax home outside the United States,
if you paid a tax of at least 10% of the gain to a foreign
country.
Foreign source income generally doesn't include gain
realized on the sale or exchange of personal property by a
U.S. resident, as defined in section 865(g).
Special rules apply in determining the source of income
from the sale of inventory; sale of depreciable property used
in a trade or business; sale of intangible property such as a
patent, copyright, or trademark; and transportation services
that begin or end in the United States or a U.S. possession.
See Pub. 514 for more information.
considered an amount of tax paid for purposes of section
901. This election is available only for contested foreign
income taxes that are paid in a tax year in which you elected
to claim a credit under section 901(a), instead of a deduction
under section 164(a)(3), for foreign income taxes that accrue
or are paid in that year. To make the election, you must file
Form 1116 for the tax year the contested liability is paid and
Form 7204. In addition, for each subsequent tax year up to
and including the tax year in which the contest is resolved,
you must annually file Schedule C (Form 1116). Any portion
of a contested foreign income tax liability for which a
provisional credit is claimed that is subsequently refunded by
the foreign country is a foreign tax redetermination under
Regulations section 1.905-3(a).
Compensation for labor or personal services as an em-
ployee. If you are an employee and receive compensation
for labor or personal services performed both inside and
outside the United States, special rules apply in determining
the source of the compensation. Compensation (other than
fringe benefits) is sourced on a time basis. Fringe benefits
(such as housing and education) are sourced on a
geographical basis. Or you may be able to use an alternative
basis to determine the source. If you use an alternative basis,
See Pub. 514 for more information.
If you are an accrual basis taxpayer or if you elected to
claim your foreign tax credit on an accrual basis, you may
elect to claim a credit for a contested foreign income tax
liability (or any portion of it) in the relation-back year when the
contested amount (or a portion of it) is paid to the foreign
country, even though the liability isn’t finally determined and
hasn’t accrued. This election is available only for contested
foreign income taxes that relate to a tax year in which you
elected to claim a credit under section 901(a), instead of a
deduction under section 164(a)(3), for foreign income taxes
that accrue or are paid in that year. To make the election, you
must file Form 1116 and Form 7204 with your return (typically
an amended return) for the tax year to which the contested
tax relates. In addition, for each subsequent tax year up to
and including the tax year in which the contest is resolved,
you must annually file Schedule C (Form 1116). Any portion
of a contested foreign income tax liability for which a
provisional credit is claimed that is subsequently refunded by
the foreign country is a foreign tax redetermination under
Regulations section 1.905-3(a).
Categories of Income
Use a separate Form 1116 to figure the credit for each
category of foreign source income listed above Part I of Form
1116. The following instructions tell you what kind of income
to include in each category. For more information, see Pub.
514, section 904, and Regulations sections 1.904-4 and
1.904-5.
a. Section 951A Category Income
Section 951A category income includes any amount included
in gross income under section 951A (other than passive
category income). Section 951A category income is
otherwise referred to as “global intangible low-taxed income
(GILTI)” and is included by U.S. shareholders of certain
CFCs. See Pub. 514 for additional details.
b. Foreign Branch Category Income
Foreign branch category income consists of the business
profits of U.S. persons that are attributable to one or more
qualified business units (QBUs) in one or more foreign
countries. Foreign branch category income doesn’t include
5
Instructions for Form 1116 (2023)
any passive category income. See Pub. 514 for further
information.
derived from each sanctioned country is subject to a
separate foreign tax credit limitation. Therefore, you must use
a separate Form 1116 for income derived from each
sanctioned country. Because no credit is allowed for taxes
paid to sanctioned countries, you would generally complete
Form 1116 for this category only through line 17.
c. Passive Category Income
Passive category income consists of passive income and
specified passive category income.
Note. A foreign tax credit may be claimed for foreign taxes
paid or accrued with respect to section 901(j) income if such
tax is paid or accrued to a country other than a sanctioned
country. For example, if a U.S. citizen resident in a
Passive category income doesn't include gain from the
sale of inventory or property held primarily for sale to
customers in the ordinary course of your trade or business;
gain from commodities hedging transactions; and active
business gains or losses of producers, processors,
merchants, or handlers of commodities. It may also not
include dividends, interest, rents, or royalties received from a
CFC in which you are a U.S. shareholder who owns 10% or
more of the total voting power or the total value of all classes
of the corporation's stock.
Passive income. Passive income generally includes
dividends, interest, royalties, rents, annuities, excess of gains
over losses from the sale of property that produces such
income or of non-income-producing investment property, and
excess of gains over losses from foreign currency or
commodities transactions. Capital gains not related to the
active conduct of a trade or business are also generally
passive income.
non-sanctioned country pays a residence-based income tax
in that country on income derived from business activities in a
sanctioned country, those foreign taxes would be eligible for
a foreign tax credit. In this situation, you would continue
completing Form 1116 and not stop at line 17.
Sanctioned countries are those designated by the
Secretary of State as countries that repeatedly provide
support for acts of international terrorism, countries with
which the United States doesn't have or doesn't conduct
diplomatic relations, or countries whose governments aren't
recognized by the United States and aren't otherwise eligible
to purchase defense articles or services under the Arms
Export Control Act. Pub. 514 contains a list of these
countries.
Passive income doesn't include export financing interest,
active business rents and royalties, or high-taxed income.
High-taxed income is income if the foreign taxes you paid on
the income (after allocation of expenses) exceed the highest
U.S. tax that can be imposed on the income.
Passive income also doesn't include financial services
income derived by a financial services entity. You are a
financial services entity if you are predominantly engaged in
the active conduct of a banking, insurance, financing, or
similar business for the tax year. Financial services income of
a financial services entity generally includes income derived
in the active conduct of a banking, financing, insurance, or
similar business. If you qualify as a financial services entity
because you treat certain items of income as active financing
income under Regulations section 1.904-4(e)(2)(i)(Y), you
must show the type and amount of each item on an
attachment to Form 1116.
If you paid taxes to a country that ceased to be a
sanctioned country during the tax year, see Pub. 514 for
details on how to figure the foreign tax credit for the period
that begins after the end of the sanctions.
Presidential waiver. The President of the United States has
the authority to waive the denial of the credit with respect to a
sanctioned country if:
The waiver is in the national interest of the United States
•
and will expand trade and investment opportunities for U.S.
companies in the sanctioned country; and
The President reports to Congress, not less than 30 days
•
before the waiver is granted, the intention to grant the waiver
and the reason for the waiver.
f. Certain Income Re-Sourced by Treaty
If a sourcing rule in an applicable income tax treaty treats
U.S. source income as foreign source, and you elect to apply
the treaty, the income will be treated as foreign source.
Specified passive category income. Dividends from a
domestic international sales corporation (DISC) or former
DISC to the extent they are treated as foreign source income,
and certain distributions from a former foreign sales
Important: You must compute a separate foreign tax credit
limitation for any income for which you claim benefits under a
treaty, using a separate Form 1116 for each amount of
re-sourced income from a treaty country. This rule doesn’t
apply to income that is re-sourced by reason of the relief from
double taxation rules in any U.S. income tax treaty that is
solely applicable to U.S. citizens who are residents of the
foreign treaty country. See sections 865(h), 904(d)(6), and
904(h)(10) and the regulations under those sections
(including 1.904-4(k)) for any grouping rules and other
exceptions. Add the amounts from line 24 of each separate
Form 1116 and enter the total on line 30 of your summary
Form 1116 (that is, the Form 1116 for which you are
corporation (FSC) are specified passive category income.
d. General Category Income
General category income is income that isn't section 951A
category income, foreign branch category income, passive
category income, or income described in categories e, f, and
g, discussed later. General category income may include the
following.
Wages, salary, and overseas allowances of an individual
•
as an employee.
Income earned in the active conduct of a trade or
•
business.
completing Part IV). In addition, you may be required to file
Form 8833, Treaty-Based Return Position Disclosure Under
Section 6114 or 7701(b), for the re-sourced income.
Gains from the sale of inventory or depreciable property
•
used in a trade or business. See Pub. 514 for additional
details.
g. Lump-Sum Distributions
You can take a foreign tax credit for taxes you paid or accrued
on a foreign source lump-sum distribution from a pension
plan. Special formulas may be used to figure a separate tax
e. Section 901(j) Income
No credit is allowed for foreign taxes imposed by and paid or
accrued to certain sanctioned countries. However, income
6
Instructions for Form 1116 (2023)
Keep for Your Records
Worksheet for Lump-Sum Distributions
1. Enter the amount from Form 1116, line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.
2.
3.
2. Enter the sum of the amounts from Form 4972, lines 6 and 12, that are from foreign sources. Also
enter this amount on Form 1116, line 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Enter the sum of the amounts from Form 4972, lines 6 and 12, that are from all sources (both U.S.
and foreign). Also enter this amount on Form 1116, line 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Divide line 2 by line 3. Enter the result as a decimal (rounded to at least four places) here and on
Form 1116, line 19. If line 2 is equal to or more than line 3, enter “1” . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.
5.
5. Enter the amount from Form 4972, line 30. Also include this amount on Form 1116, line 20 . . . . . . . . .
Don't include the amount on line 5 above in the tax you enter on line 20 of any other
Form 1116 you are filing.
!
CAUTION
6. Multiply line 5 by line 4. Enter the result here and on Form 1116, line 21 . . . . . . . . . . . . . . . . . . . . . . . .
6.
7.
7. Enter the smaller of line 1 or line 6 here and on Form 1116, line 24. To the left of line 24, enter
“LSD” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
on a qualified lump-sum distribution for the year in which the
distribution is received. See Pub. 575 for more information.
General Information for Partners and S
Corporation Shareholders
If you are able to elect, and do elect, to figure your U.S. tax
on a lump-sum distribution using Form 4972, Tax on
Lump-Sum Distributions, a separate foreign tax credit
limitation applies. Use a separate Form 1116. On this
separate Form 1116, check box g above Part I. Skip Part I.
Complete Part II showing only foreign taxes that are
attributable to the lump-sum distribution. Then, complete the
Worksheet for Lump-Sum Distributions to figure the amounts
to enter in Part III.
Less-than-10% limited partners. If you are a limited
partner and you own a less-than-10% interest (by value) in
the partnership, you must generally categorize your
distributive share of foreign source income and deductions
from that partnership as passive income. See the Partner’s
Instructions for Schedule K-3 (Form 1065) and Regulations
section 1.904-4(n) for more details and exceptions.
Reporting amounts on Form 1116. Include amounts
reported to you on Schedule K-3 with any other amounts
reportable on Form 1116 using:
Special Rules
Look-Through Rules
Certain income received or accrued by you as a
A separate Form 1116 for each category of income, and
A separate column in Part I and a separate line in Part II for
•
•
each country or possession.
10%-or-more U.S. shareholder in a CFC is treated as income
in one of the separate categories listed under Categories of
Income, earlier. For example, subpart F inclusions, dividends,
interest, rents, and royalties from a CFC are only treated as
passive category income to the extent they are attributable to
passive category income of the CFC. See Regulations
section 1.904-5 for more information.
Note. For any item that isn't reported by country on
Schedule K-3, you may use any reasonable method to
allocate it between countries or possessions on Form 1116.
Explanation of Certain Line Items on Schedule K-3
for Forms 1065, 1120-S, and 8865
Forms 1065, 1120-S, and 8865, Schedule K-3, Part II,
Section 1, columns (b) through (e)—Foreign gross in-
come sourced at partnership or S corporation level.
Income reported in these columns has already been sourced
for you by the partnership or S corporation. The partnership
or S corporation has reported this income to you by country
and by category of income. Include these amounts in Part I of
each of the applicable Forms 1116 (that is, a separate Form
1116 for each category of income you received). See the
partner and shareholder instructions for Forms 1065 and
1120-S, Schedule K-3, for further information.
Forms 1065, 1120-S, and 8865, Schedule K-3, Part II,
Section 1, column (f)—Gross income sourced by part-
ner or shareholder. This column includes income from the
sale of eligible personal property (most personal property
other than inventory, depreciable property, and certain
intangible property). See Pub. 514 for details. You must first
determine (using the rules described next) whether the
Reporting Foreign Tax Information From
Partnerships and S Corporations
If you received a Schedule K-3 from a partnership or S
corporation that includes foreign tax information, use the
rules below to report that information on Form 1116.
Note. In 2023, the partnership or S corporation may be
excepted from providing Schedule K-3 to you if the
partnership or S corporation has limited foreign activity. You
still have the right to request Schedule K-3 and it may provide
information that can increase your foreign tax credit. See the
partnership and S corporation instructions for Form 1065 and
Form 1120-S, Schedules K-2 and K-3, and the partner and
shareholder instructions for Forms 1065 and 1120-S,
7
Instructions for Form 1116 (2023)
income in this column is U.S. source income or foreign
source income. Then, only enter the foreign source income in
Part I of each of the applicable Forms 1116 (that is, a
separate Form 1116 for each category of income you
received).
Use the following rules to source the income reported to
you in this column of Schedule K-3. If you are a U.S. resident
(as defined next), the income is U.S. source income. If you
are a nonresident (as defined later), the income is foreign
source income. See the partner and shareholder instructions
for Forms 1065 and 1120-S, Schedule K-3, for further
information.
Forms 1065, 1120-S, and 8865, Schedule K-3, Part II,
Section 2, lines 25 through 38, and 44 through 50, col-
umns (b) through (e)—Deductions allocated and appor-
tioned at partnership or S corporation level to foreign
source income. The partnership or S corporation has
already allocated these expenses to foreign source income
and has reported them to you by category of income. Include
these amounts on line 2 of each of the applicable Forms
1116 (that is, a separate Form 1116 for each category of
income you received). See the partner and shareholder
instructions for Forms 1065 and 1120-S, Schedule K-3, for
further information.
U.S. resident. A U.S. resident is a U.S. citizen or resident
alien who doesn't have a tax home in a foreign country or a
nonresident alien who has a tax home in the United States.
Tax home. Generally, your tax home is the general area of
your main place of business, employment, or post of duty,
regardless of where you maintain your family home. Your tax
home is the place where you are permanently or indefinitely
engaged to work as an employee or self-employed individual.
If you don't have a regular or main place of business because
of the nature of your work, then your tax home is the place
where you regularly live. If you don't fit either of these
categories, you are considered an itinerant and your tax
home is wherever you work.
Nonresident. A nonresident is any person who isn't a U.S.
resident. U.S. citizens and resident aliens with a foreign tax
home won't be treated as nonresidents for a sale of eligible
personal property unless a foreign tax of 10% or more was
paid or accrued on the gain on the sale (or, in the case of a
loss sale, a foreign tax of 10% or more would have been paid
had the sale resulted in a gain).
Forms 1065, 1120-S, and 8865, Schedule K-3, Part II,
Section 2, lines 25 through 38, and 44 through 50, col-
umn (f)—Other expenses. These lines in column (f)
include expenses (other than interest expense) of the
partnership or S corporation that must be allocated and
apportioned at the partner or shareholder level (for example,
research and experimental (R&E) expenses on line 32).
Combine your distributive share of these expenses with all
of your other like expenses, if any, and then allocate and
apportion them using the applicable rules (for example, for
R&E expenses, the rules under Regulations section
1.861-17(f)).
Forms 1065, 1120-S, and 8865, Schedule K-3, Part III,
Section 1, reports information you will need to allocate and
apportion R&E expense. Forms 1065 and 8865,
Schedule K-3, Part III, Section 3, reports information you will
need to allocate and apportion the foreign-derived intangible
income deduction to foreign source income in separate
categories. Include expenses that you allocate to foreign
source income on line 2 of the applicable Form 1116.
Expenses that you allocate to U.S. source income shouldn't
be entered on any line of Part I of Form 1116. See the partner
and shareholder instructions for Forms 1065 and 1120-S,
Schedule K-3, for further information.
Note. To help you with these rules, the partnership or S
corporation has specifically identified the following on an
attachment to Form 1065, 1120-S, or 8865. See
Schedule K-3, Part I, box 1.
Gains on the sale of eligible personal property for which a
•
Forms 1065, 1120-S, and 8865, Schedule K-3, Part II,
Section 2, lines 39 through 43—Interest expense. See
interest expense shown on these lines of Schedule K-3. In
applying those instructions, take into account your distributive
share of the partnership's or S corporation's gross income
(for purposes of the $5,000 threshold) or your pro rata share
of the partnership's or S corporation's assets. See Forms
1065, 1120-S, and 8865, Schedule K-3, Part III, Section 2, for
the share of the partnership's or S corporation's assets.
However, if you were a limited partner and your interest in the
partnership was less than 10%, see the next paragraph.
Include interest expense that you allocate to foreign source
income on line 4b of the applicable Form 1116. Don't enter in
Part I of Form 1116 any interest expense that you allocate to
U.S. source income.
foreign tax of 10% or more was paid or accrued.
Losses on the sale of eligible personal property for which a
•
foreign tax of 10% or more would have been paid had the
sale resulted in a gain.
Include foreign source income in Part I of the applicable
Form 1116 (that is, the Form 1116 for the applicable category
of income). Don't include in Part I of Form 1116 income that
you determined (using these rules) to be U.S. source income.
If the partnership or S corporation has specifically
identified any capital gains or losses or unrecaptured
!
CAUTION
section 1250 gain on Schedule K-3, Part II, Section 1,
line 8, or lines 11 through 15, and you have determined that
those gains or losses are foreign source, see Foreign
Qualified Dividends and Capital Gains (Losses), later, before
entering an amount in Part I of Form 1116. See the partner
and shareholder instructions for Forms 1065 and 1120-S,
Schedule K-3, for further information.
Less-than-10% limited partners. If you are a limited
partner and you own (directly or indirectly) a less-than-10%
interest (by income) in the partnership, you may generally
allocate your distributive share of interest expense from that
partnership to foreign or U.S. source income based on your
distributive share of the gross foreign or U.S. source income
of that partnership. The interest expense you allocate to
foreign source income may generally be apportioned
exclusively to passive category income. However, see
Temporary Regulations section 1.861-9T(e)(4) for
Forms 1065, 1120-S, and 8865, Schedule K-3, Part II,
Section 1, line 24, column (g)—Total gross income.
Combine your distributive share of “Total gross income” from
Schedule K-3 with all of your other gross income and enter
the total on line 3e. Note that you must include the total for all
countries in each column of line 3e. “Gross income from all
sources” is a constant amount (that is, you will enter the
same amount on line 3e for each column of all Forms 1116
that you file).
exceptions. See the Partner’s Instructions for Schedule K-3
(Form 1065) for further information.
8
Instructions for Form 1116 (2023)
Forms 1065 and 8865, Schedule K-3, Part III, Section 4,
line 1; and Form 1120-S, Schedule K-3, Part III, Section
3, line 1—Foreign taxes. The partnership or S corporation
has already allocated and apportioned total foreign taxes for
you and has reported them to you by country and by category
of income. Include these amounts in Part II of each of the
applicable Forms 1116 (that is, a separate Form 1116 for
each category of income you received). See the partner and
shareholder instructions for Forms 1065 and 1120-S,
Schedule K-3, for further information.
Forms 1065 and 8865, Schedule K-3, Part III, Section 4,
line 2; and Form 1120-S, Schedule K-3, Part III, Section
3, line 2—Reduction of taxes. The partnership or S
corporation has already apportioned the reduction in taxes
available for credit and has reported it to you by category of
income. Include these amounts on line 12 of each of the
applicable Forms 1116 (that is, a separate Form 1116 for
each category of income you received). See the partner and
shareholder instructions for Forms 1065 and 1120-S,
Schedule K-3, for further information.
Forms 1065 and 8865, Schedule K-3, Part III, Section 4,
line 3; and Form 1120-S, Schedule K-3, Part III, Section
3, line 3—Foreign tax redeterminations. The partnership
or S corporation has already apportioned the change in
foreign income tax liability and has reported it to you by
country and by category of income. Include these amounts
on each of the applicable Schedules C (Form 1116) (that is, a
separate Schedule C (Form 1116) for each category of
income you received). See the partner and shareholder
instructions for Forms 1065 and 1120-S, Schedule K-3, for
further information.
Qualified Dividends and Capital Gain Tax
Worksheet (Individuals)
If you completed the Qualified Dividends and Capital Gain
Tax Worksheet in the Instructions for Form 1040 and you
don't have to file Schedule D, you may have to adjust the
amount of your foreign source qualified dividends and capital
gain distributions.
You must adjust the amount of your foreign source
qualified dividends and capital gain distributions if both of the
following apply.
Line 5 of the Qualified Dividends and Capital Gain Tax
•
Worksheet is greater than zero.
Line 23 of the Qualified Dividends and Capital Gain Tax
•
Worksheet is less than line 24 of that worksheet.
Adjustment exception. If you qualify for the adjustment
exception, you can elect not to adjust your foreign source
capital gain distributions and qualified dividends. You make
this election by not adjusting these items. If you make this
election, you must elect not to adjust any of your foreign
source qualified dividends or capital gain distributions.
You qualify for the adjustment exception if you meet both
of the following requirements.
1. Line 5 of the Qualified Dividends and Capital Gain Tax
Worksheet doesn't exceed:
a. $364,200 if married filing jointly or qualifying surviving
spouse,
b. $182,100 if married filing separately,
c. $182,100 if single, or
d. $182,100 if head of household.
Note. See the partner and shareholder instructions for
Forms 1065 and 1120-S, Schedule K-3, Parts I, II, and III, for
information related to foreign oil and gas taxes, high-taxed
income, partner loan transactions, foreign tax
2. The amount of your foreign source capital gain
distributions, plus the amount of your foreign source qualified
dividends, is less than $20,000.
redeterminations, and other information that may be
necessary to complete Form 1116.
Foreign Qualified Dividends and
Capital Gains (Losses)
If you are subject to the alternative minimum tax, see the
special rules in Regulations section 1.904(b)-1(b)(3).
How to make adjustments. To adjust your foreign source
qualified dividends or capital gain distributions, multiply your
foreign source qualified dividends or capital gain distributions
in each separate category by 0.4054 if the foreign source
qualified dividends or capital gain distributions are taxed at a
rate of 15%, and by 0.5405 if they are taxed at a 20% rate.
Include the results on line 1a of the applicable Form 1116.
You adjust your foreign source qualified dividends or
capital gain distributions taxed at the 0% rate by not
including them on line 1a.
No adjustments required. If you aren't required to adjust
the amount of your foreign source qualified dividends or
capital gain distributions, or you qualify for the adjustment
exception and elect not to adjust these items, include the
amount of your foreign source qualified dividends and capital
gain distributions in each separate category (without
adjustment) on line 1a of the applicable Form 1116.
Qualified dividends are the amounts you entered on
Form 1040, 1040-SR, or 1040-NR, line 3a.
TIP
If you have foreign source qualified dividends or foreign
source capital gains (including any foreign source capital
gain distributions) or losses, you may be required to make
certain adjustments to those amounts before taking them into
account on line 1a (gross income) or line 5 (losses).
If you completed the Qualified Dividends and Capital Gain
Tax Worksheet in the Instructions for Form 1040, and aren't
required to file Schedule D, see Qualified Dividends and
the adjustments you may be required to make. If you
completed the Qualified Dividends Tax Worksheet in the
adjustments you may be required to make. If you are required
the adjustments you may be required to make.
Qualified Dividends Tax Worksheet (Estates and
Trusts)
If you completed the Qualified Dividends Tax Worksheet in
the Instructions for Form 1041, you must adjust the amount of
your foreign source qualified dividends if:
You can elect not to make the adjustments to your
qualified dividends and capital gains if you qualify for the
adjustment exception. See Adjustment exception under
9
Instructions for Form 1116 (2023)
Line 5 of the Qualified Dividends Tax Worksheet is greater
You qualify for the adjustment exception if you meet both
of the following requirements.
1. Line 5 of the Qualified Dividends and Capital Gain Tax
Worksheet in the Form 1040 instructions or line 18 of the
Schedule D Tax Worksheet in the Schedule D (Form 1040)
instructions is less than or equal to:
•
than zero, and
Line 21 of the Qualified Dividends Tax Worksheet is less
•
than line 22 of that worksheet.
Adjustment exception. If you qualify for the adjustment
exception, you can elect not to adjust your foreign source
qualified dividends. You make this election by not adjusting
these dividends. If you make this election, you must elect not
to adjust any of your foreign source qualified dividends.
See section 904(b) and the regulations issued under that
Code section to determine if you qualify for the adjustment
exception.
a. $364,200 if married filing jointly or qualifying surviving
spouse,
b. $182,100 if married filing separately,
c. $182,100 if single, or
d. $182,100 if head of household.
2. The amount of your foreign source net capital gain,
plus the amount of your foreign source qualified dividends, is
less than $20,000.
How to make adjustments. To adjust your foreign source
qualified dividends, multiply your foreign source qualified
dividends in each separate category by 0.4054 if the foreign
source qualified dividends are taxed at a rate of 15%, and by
0.5405 if they are taxed at a 20% rate. Include the results on
line 1a.
For trusts and estates, see section 904(b) and the
regulations issued under that Code section to determine if
you qualify for the adjustment exception.
You adjust your foreign source qualified dividends taxed at
If you are subject to the alternative minimum tax, see the
special rules in Regulations section 1.904(b)-1(b)(3).
Note. Your foreign source net capital gain is the excess of
your net long-term capital gain from foreign sources over your
net short-term capital loss from foreign sources. Ignore any
long-term capital gains you elected to include on Form 4952,
line 4g, in determining your foreign source net capital gain.
Ignore any qualified dividends you elected to include on Form
4952, line 4g, in determining the amount of your foreign
source qualified dividends.
How to make adjustments. To adjust your foreign source
qualified dividends, multiply your foreign source qualified
dividends in each separate category by 0.4054 if the foreign
source qualified dividends are taxed at a rate of 15%, and by
0.5405 if they are taxed at a 20% rate. Include the results on
line 1a of the applicable Form 1116.
the 0% rate by not including them on line 1a.
Don't adjust the amount of any foreign source
qualified dividends that you elected to include on
!
CAUTION
Form 4952, line 4g.
No adjustment required. If you aren't required to make
adjustments to your foreign source qualified dividends (or
you qualify for the adjustment exception and you elected not
to adjust these dividends), include your foreign source
qualified dividends on line 1a of the applicable Form 1116
without adjustment.
Schedule D Filers
Note. Throughout these instructions, references to
Schedule D (Form 1041) are for estates and trusts only.
You adjust your foreign source qualified dividends taxed at
Adjustments to foreign qualified dividends. If you are
required to file Schedule D (Form 1040), you must adjust the
amount of your foreign source qualified dividends that you
include on line 1a of Form 1116 if one of the following applies
to you.
1. You figured your tax using the Qualified Dividends and
Capital Gain Tax Worksheet in the Form 1040 instructions,
line 5 of that worksheet is greater than zero, and line 23 of
that worksheet is less than line 24.
2. You figured your tax using Schedule D (Form 1041),
line 27 of Schedule D is greater than zero, and line 43 of
Schedule D is less than line 44.
3. You figured your tax using the Schedule D Tax
Worksheet (in the Schedule D (Form 1040) instructions),
line 18 of the Schedule D Tax Worksheet is greater than zero,
and line 45 of the Schedule D Tax Worksheet is less than
line 46.
the 0% rate by not including them on line 1a.
Don't adjust the amount of any foreign source
qualified dividends that you elected to include on
!
CAUTION
Form 4952, line 4g.
No adjustment required. If you aren't required to adjust
your foreign source qualified dividends (or you qualify for the
adjustment exception and elect not to adjust these
dividends), include on line 1a of Form 1116 the full amount of
foreign source qualified dividends without adjustment.
Adjustments to foreign capital gains and losses. You
under Capital Gains and Losses in Pub. 514 to determine the
adjustments you must make to your foreign capital gains or
losses. Read the instructions that follow to see if you qualify
to use Worksheet A or Worksheet B. If you don't qualify to
use Worksheet A or Worksheet B, use the instructions under
Capital Gains and Losses in Pub. 514 to determine the
adjustments you must make.
4. You figured your tax using the Schedule D Tax
Worksheet (in the Schedule D (Form 1041) instructions),
line 17a of the Schedule D Tax Worksheet is greater than
zero, and line 42 of the Schedule D Tax Worksheet is less
than line 43.
Before you complete Worksheet A or Worksheet B,
you must reduce each foreign source long-term
!
CAUTION
capital gain by the amount of that gain you elected to
Adjustment exception. If you qualify for the adjustment
exception, you can elect not to adjust your foreign source
qualified dividends. You make this election by not adjusting
these dividends or your foreign capital gains (or losses). If
you make this election, you must elect not to adjust any of
your foreign source qualified dividends.
include on Form 4952, line 4g. The gain you elected to
include on Form 4952, line 4g, must be entered directly on
line 1a of the applicable Form 1116 without adjustment.
adjustments you must make to your foreign source capital
gains or losses if you have foreign source capital gains or
10
Instructions for Form 1116 (2023)
losses in no more than two separate categories and any of
the following apply.
to more than three countries or possessions, attach
additional sheets following the format of Parts I and II.
Foreign tax credit splitting event. If you had a foreign tax
credit splitting event in a previous year and you are taking the
related income into account in 2023, enter “909 income” on
line i for that income instead of the country or possession
name.
You qualify for the adjustment exception discussed earlier
•
Schedule D Filers and you didn't make any adjustments to
your foreign qualified dividends (if any).
Line 15 or 16 of Schedule D (Form 1040) (line 18a or 19 of
•
Schedule D (Form 1041)) is zero or a loss.
Section 863(b) gross income and deductions. You don't
need to report section 863(b) income (certain income from
services or inventory that is partly from U.S. source and partly
from foreign source) on a per-country basis. Total all section
863(b) foreign source income in the applicable category and
enter the total in a single column in Part I. Enter “863(b)” on
line i. Total all section 863(b) deductions in the applicable
category and in the same column enter the totals on lines 2
through 6. Total all foreign taxes imposed on section 863(b)
income and enter the total on a single line in Part II for the
applicable category.
Regulated investment company (RIC) pass-through
amounts. You don't need to report income passed through
from a mutual fund or other RIC on a country-by-country
basis. Total all income, in the applicable category, passed
through from the mutual fund or other RIC and enter the total
in a single column in Part I. Enter “RIC” on line i. Total all
foreign taxes passed through and enter the total on a single
line in Part II for the applicable category.
You figured your tax using the Qualified Dividends and
•
Capital Gain Tax Worksheet in the Form 1040 instructions
and (a) line 3 of that worksheet is zero or less, (b) line 5 of
that worksheet is zero, or (c) line 23 of that worksheet is
equal to or greater than line 24.
You figured your tax using Schedule D (Form 1041) and (a)
•
line 27 of Schedule D is zero; (b) line 22 of Schedule D minus
the amount on Form 4952, line 4e, that you elected to include
on Form 4952, line 4g, is zero or less; or (c) line 43 is equal to
or greater than line 44.
You figured your tax using the Schedule D Tax Worksheet
•
(in the Schedule D (Form 1040) instructions) and (a) line 18
is zero, (b) line 9 is zero or less, or (c) line 45 is equal to or
greater than line 46.
You figured your tax using the Schedule D Tax Worksheet
•
(in the Schedule D (Form 1041) instructions) and (a) line 17a
is zero, (b) line 9 is zero or less, or (c) line 42 is equal to or
greater than line 43.
gains or losses in two separate categories. Keep the
completed Worksheet A for your records. Don't file
Worksheet A with your tax return.
Inclusions under section 951A. Because computations for
inclusions under section 951A are reported on separate
Forms 8992, U.S. Shareholder Calculation of Global
Intangible Low-Taxed Income, you don't need to report those
inclusions on a country-by-country basis. Enter the total
inclusion in a single column in Part l and enter “951A” on line
i.
Capital losses are deductible only up to $3,000 ($1,500 if
married filing separately) of ordinary income.
Worksheet B to determine the adjustments you must make to
your foreign source capital gains or losses if:
High-taxed income. Passive income doesn't include
high-taxed income. High-taxed income is income if the
foreign taxes you paid on the income (after allocation of
expenses) exceed the highest U.S. tax that can be imposed
on the income. See Regulations section 1.904-4(c) for more
information. If you have passive income that is high-taxed
income, use a separate column in Part I. Enter “HTKO” on
line i of Forms 1116 for passive category income and the
other category of income to which such passive category
income is reclassified. On your Form 1116 for passive
category income, passive income that is treated as another
category of income because it is high taxed should be
included on line 1a in the column for the country entered on
line i. Also, enter the high-taxed income in the “HTKO”
column on line 1a as a negative number. On your Form 1116
for the other category of income, the high-taxed income
should be entered as a positive number on line 1a in the
“HTKO” column. Don't enter any amounts on lines 2 through
5 for your “HTKO” column. Add all deductions that are
definitely related or apportioned to passive income that is
treated as another category of income because it is high
taxed and enter the total amount of those deductions on
line 6 in the appropriate “HTKO” column. Enter the amount as
a negative number in the “HTKO” column on your Form 1116
for passive category income. Enter the amount as a positive
number in the “HTKO” column on your Form 1116 for the
later.
You have foreign source capital gains or losses in no more
•
than two separate categories,
You didn't complete the Unrecaptured Section 1250 Gain
•
Worksheet or the 28% Rate Gain Worksheet in the
Schedule D instructions, and
You don't have any capital gains taxed at a rate of 0% or
•
20%.
gains or losses in two separate categories. Keep the
completed Worksheet B for your records. Don't file
Worksheet B with your tax return.
Capital losses are deductible only up to $3,000 ($1,500 if
married filing separately) of ordinary income.
Specific Instructions
Part I—Taxable Income or Loss From
Sources Outside the United States
Part I must be completed by all filers unless
specifically indicated otherwise in these instructions.
!
CAUTION
Line i—Foreign Country or U.S. Possession
Generally, if you received income from, or paid taxes to, more
than one foreign country or U.S. possession, report
information on a country-by-country basis on Form 1116,
Parts I and II. Use a separate column in Part I and a separate
line in Part II for each country or possession. If you paid taxes
11
Instructions for Form 1116 (2023)
Keep for Your Records
Worksheet A (See instructions.)
Category #1
Category #2
▶
Specify
ꢀ
1. Separate category capital gain or (loss) . . . . . . . . . . . . . . . . . . . . . 1.
2. Foreign source capital gain net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.
3. Capital gain net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
4. Total U.S. capital loss adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.
5. Adjusted separate category capital gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.
6. U.S. capital loss adjustment factor. (For each separate category,
divide line 1 by line 2 and round off the result
to at least four decimal places.) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.
7. U.S. capital loss adjustment. (For each separate category, multiply
line 4 by line 6.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.
8. Adjusted separate category capital gain. (For each
separate category, subtract line 7 from line 1. Enter
the result here and include the result on line 1a of the
applicable Form 1116.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.
Instructions for Worksheet A
Line 1. For each separate category for which you have foreign source capital gains or losses, combine your foreign source capital gains
and losses in that separate category and enter the result on line 1. Show a loss on line 1 of this worksheet as a negative amount and include
the loss on line 5 of the Form 1116 you are filing for that separate category.
Line 2. Combine the amounts entered on line 1. If the result is zero or less, don't complete the rest of the worksheet. Instead, for each
separate category with a positive amount on line 1 of this worksheet, include that positive amount on line 1a of the Form 1116 you are filing
for that separate category.
Line 3. Enter the amount from line 16 of Schedule D (Form 1040), less the portion of net capital gain you included on Form 4952, line 4g. If
the result is zero or less, enter -0-.
Estates and trusts: Enter the amount from line 19 of Schedule D (Form 1041), less any amount shown on line 25 of that Schedule D. If
the result is zero or less, enter -0-.
Line 4. Subtract line 3 from line 2 and enter the result on line 4. If the result is zero or less, don't complete the rest of the worksheet. Instead,
for each separate category with a positive amount on line 1 of this worksheet, include that positive amount on line 1a of the Form 1116 you
are filing for that separate category.
Line 5.
If both separate categories have a positive amount on line 1, skip line 5 and go to line 6.
•
If only one separate category has a positive amount on line 1, subtract line 4 from that positive amount. Enter the result here and include
•
the result on line 1a of the Form 1116 you are filing for that separate category. Skip lines 6–8 of this worksheet.
12
Instructions for Form 1116 (2023)
Keep for Your Records
Worksheet B (See instructions.)
Category #1
Category #2
▶
▶
Specify
ꢀ____________
Specify
ꢀ__________
(1)
(2)
Long-Term
(15%)
(3)
(4)
(5)
Other
Short-Term
Short-Term
Long-Term
(15%)
1. Separate category rate
group capital gain or (loss)
2. U.S. capital loss adjustment
amount
3. Subtotal (subtract line 2 from
line 1 gain amounts)
4. Net U.S. long-term capital
loss
5. U.S. long-term capital loss
adjustment
6. Excess net U.S. long-term
capital loss
7. Long-term capital gain (or
adjustment amount)
8. Limitation percentage
9. Long-term limitation amounts
10. Adjustment amounts
11. Rate differential adjustments
12. Long-term gains
13. Rate differential adjustment
14. Long-term gain
15. Adjusted separate category
capital gains and losses
13
Instructions for Form 1116 (2023)
Instructions for Worksheet B
Line 1. For each separate category, combine the capital gains and losses as follows.
Combine your foreign source short-term capital gains and losses and enter the result in column (1) or (3).
Combine your foreign source long-term capital gains and losses and enter the result in column (2) or (4).
•
•
Line 4. Enter your net long-term capital loss (if any) from U.S. sources. To determine this amount, subtract your long-term
capital losses from U.S. sources from your long-term capital gains from U.S. sources. Enter the loss (if any) as a positive
amount in column (5). If you don't have a loss, leave line 4 blank and skip lines 5 through 14.
Line 5. Combine the amounts (if any) from columns (2) and (4) on line 2. Enter the result in column (5). If you don't have any
amount entered in either column, enter -0- in column (5).
Line 6. Subtract line 5 from line 4. Enter the result in column (5). If the result is zero or less, leave line 6 blank and skip lines 7
through 14 of this worksheet.
Line 7.
If you entered an amount in either column (2) or (4) (but not both) of line 3, subtract line 6 from the amount entered in either
•
column (2) or (4) of line 3. Enter the result in column (2) or (4) on line 7 and skip lines 8 through 12.
If you entered amounts in both columns (2) and (4) on line 3, combine those amounts and enter the result in column (5) on
•
line 7.
Line 8. Divide line 3, column (2), by line 7, column (5). Enter the result on line 8, column (2). Divide line 3, column (4), by
line 7, column (5). Enter the result on line 8, column (4). Round off each result to at least four decimal places.
Line 9. Multiply each decimal amount on line 8 by line 6 and enter the results in the appropriate columns on line 9.
Line 10. Subtract line 9, column (2), from line 3, column (2), and enter the result on line 10, column (2). Subtract line 9,
column (4), from line 3, column (4), and enter the result on line 10, column (4).
Line 11. Multiply each amount on line 10 by 0.4054 and enter the results here.
Line 12. Combine line 11, column (2), with line 9, column (2), and enter the result on line 12, column (2). Combine line 11,
column (4), with line 9, column (4), and enter the result on line 12, column (4). Include the amounts on line 1a of the
applicable Form 1116. Skip lines 13 and 14.
Line 13. Multiply the amount on line 7 by 0.4054 and enter the result here in the applicable column.
Line 14. Combine line 6 and line 13 and enter the result here. Include the result on line 1a of the applicable Form 1116.
Line 15.
If you have a:
Short-term gain shown in column (1) or (3) of line 3, enter the amount of that short-term gain on line 15, column (1) or (3).
Long-term gain shown in column (2) or (4) of line 3, and line 6 is blank, multiply the amount of each gain by 0.4054 and
•
•
enter the result on line 15, column (2) or (4).
Short-term loss in any column of line 1, complete the Line 15 Worksheet for each column with a loss.
•
•
Long-term loss in column (2) or (4) of line 1, multiply the amount of the loss by 0.4054 and enter the result on line 15 in the
appropriate column.
After you have completed line 15:
Include line 15 gain amounts on line 1a of the applicable Form 1116, and
Include line 15 loss amounts on line 5 of the applicable Form 1116.
•
•
14
Instructions for Form 1116 (2023)
Line 2 Worksheet (For Line 2 of Worksheet B)
(See instructions below.)
Keep for Your Records
Category #1
Category #2
▶
Specify
Short-Term
Long-Term
Short-Term
Long-Term
1. Separate category rate group
gain (or loss) . . . . . . . . . . . . . . . 1.
2. Separate category gain (or loss) 2.
3. Foreign source capital gain net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
4. Capital gain net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.
5. Total U.S. capital loss adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.
6. Separate category
adjustment . . . . . . . . . . . . . . . . . 6.
7. Rate Group Factor . . . . . . . . . . 7.
8. Rate Group Adjustment . . . . . . 8.
Instructions for Line 2 Worksheet
Line 1. Enter your gains and losses from line 1 of Worksheet B. Enter a loss as a negative amount (in parentheses).
Line 2. For each separate category, combine the amounts from line 1. Enter a loss as a negative amount (in parentheses).
Line 3. Combine the amounts from line 2 of this worksheet. If the result is zero or less, stop here. Don't enter any amount on
Line 4. Enter the amount from line 16 of Schedule D (Form 1040), less the portion of net capital gain you included on Form
4952, line 4g. If the amount entered on line 4 is zero or less, stop here. Don't continue with this worksheet or Worksheet B.
Estates and trusts: Enter the amount from line 19 of Schedule D (Form 1041), less any amount shown on line 25 of that
Schedule D. If the amount entered on line 4 is zero or less, stop here. Don't continue with this worksheet or Worksheet B.
Line 5. Subtract line 4 from line 3 and enter the result on line 5. If the result is zero or less, stop here. Don't enter any amount
Line 6.
If only one separate category has a positive amount on line 2, enter the amount from line 5 on line 6 (in the column for the
•
separate category with the positive amount on line 2).
If both separate categories have positive amounts on line 2, divide each amount on line 2 by line 3. Multiply each result by
•
line 5. Enter the results on line 6 in the appropriate columns.
Line 7.
For each separate category, the following rules apply.
If you entered an amount on line 6 and you entered positive amounts in both the short-term and long-term columns on
•
•
line 1, divide each positive amount on line 1 by line 2 and enter the results in the appropriate columns.
Leave line 7 blank if you didn't enter an amount on line 6 or only one column on line 1 has a positive amount.
Line 8.
For each separate category, the following rules apply.
If you entered amounts on line 7, multiply each amount on line 7 by line 6. Enter the results in the appropriate columns on
•
•
If line 7 is blank, enter the amount from line 6 in the same column on line 8 as the column that has a gain on line 1. Also,
enter the amount on line 2 of Worksheet B in the appropriate column. If line 6 is blank, don't enter any amount on line 8 of this
worksheet or line 2 of Worksheet B.
15
Instructions for Form 1116 (2023)
Keep for Your Records
Line 15 Worksheet (For Line 15 of Worksheet B)
1. Enter your net short-term capital gain (if any) from U.S. sources. To determine this amount, subtract your
short-term capital losses from U.S. sources from your short-term capital gains from U.S. sources. If the result is
zero or a loss, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.
2. If you entered a short-term gain on line 3 of Worksheet B, enter that amount here . . . . . . . . . . . . . . . . . . . . . . . . . 2.
3. Add lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
4. Did you enter a short-term capital loss on line 1 of Worksheet B for one (but not both) of the separate
categories?
Yes.
No.
Complete lines 5–10 and skip the rest of this worksheet.
Skip lines 5–10 and go to line 11.
5. Enter the short-term capital loss from line 1 of Worksheet B (enter the loss as a positive amount) . . . . . . . . 5.
6. Enter the gain, if any, determined on line 3. If line 3 isn't a gain, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.
7. Subtract line 6 from line 5. If zero or a loss, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.
8. Multiply line 7 by 0.4054 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.
9. Enter the smaller of line 5 or line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.
10. Add lines 8 and 9. Enter the result here and on line 15 of Worksheet B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.
11. Is the amount on line 1 zero?
Yes.
Multiply each short-term loss by 0.4054. Enter the results on line 15 of Worksheet
B. Skip the rest of this worksheet.
No.
Go to line 12.
12. Enter your short-term loss from Worksheet B, line 1, column (1) (enter the loss as a positive
amount) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.
13. Enter your short-term loss from Worksheet B, line 1, column (3) (enter the loss as a positive
amount) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.
14. Add lines 12 and 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.
15. Enter the gain determined in line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.
16. Subtract line 15 from line 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.
Is the result zero or less?
Yes.
Skip the rest of this worksheet. Enter each short-term loss from line 1 on line 15 of
Worksheet B, in the applicable column, without adjustment (that is, each short-term
loss you enter on line 15 of Worksheet B will be the same as the short-term loss
you entered on line 1 of Worksheet B).
No.
Complete lines 17–22.
17. Multiply line 16 by 0.4054 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.
18. Add lines 15 and 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.
19. Divide line 12 by line 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.
20. Multiply line 19 by line 18. Enter the result here and on Worksheet B, line 15, column (1) . . . . . . . . . . . . . . . . . . 20.
21. Divide line 13 by line 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.
22. Multiply line 21 by line 18. Enter the result here and on Worksheet B, line 15, column (3) . . . . . . . . . . . . . . . . . . . 22.
16
Instructions for Form 1116 (2023)
(Form 1040). Don't include deductions and losses related to
exempt or excluded income such as foreign earned income
you have excluded on Form 2555 on lines 2 through 5.
Lines 1a and 1b—Foreign Gross Income
Include income in the category checked above Part I that is
taxable by the United States and is from sources within the
country entered on line i. You must include income even if it
isn't taxable by that foreign country. Identify the type of
income on the dotted line next to line 1a. Don't include any
earned income excluded on Form 2555, Foreign Earned
Income.
Special rules apply to the allocation of research and
experimental expenditures. See Regulations section
1.861-17.
If the law of a U.S. state to which you pay income taxes
doesn't specifically exempt foreign source income from tax,
you may be required to make a special allocation of state
taxes you paid. See Pub. 514 for more information.
Example. If you received dividends (passive category
income) and wages (general category income) from foreign
sources, you must complete two Forms 1116. On one Form
1116, check box c (passive category income), enter the
dividends on line 1a, and enter “Dividends” on the dotted
line. On the other Form 1116, check box d (general category
income), enter on line 1a wages not excluded on Form 2555,
and enter “Wages” on the dotted line. Complete Parts I, II,
and III of each Form 1116. Then, complete Part IV on the
Form 1116 with the larger amount entered on line 24.
The deduction for state and local taxes on
Schedule A (Form 1040), lines 5a through 5c, is
!
CAUTION
generally limited to $10,000 ($5,000 if married filing
separately). Don't include more than this amount of state and
local taxes on Form 1116, lines 2 and 3a.
Line 2
If you are filing a Form 1116 that includes foreign
source qualified dividends or foreign source capital
Enter your deductions that definitely relate to the gross
income from foreign sources shown on line 1a. For example,
if you are reporting foreign business income on line 1a,
include on line 2 business expenses such as supplies and
advertising incurred as part of operating the foreign business.
Also include on line 2 state and local income taxes related to
foreign source income. For more information, see Pub. 514
and section 861 and the regulations under that section.
Attach a statement listing the separate expenses included on
line 2.
!
CAUTION
gains or losses, see Foreign Qualified Dividends and
Capital Gains (Losses), earlier.
Line 1b
You must check the box on line 1b if all of the following apply.
The income on line 1a is compensation for services you
•
performed as an employee.
Your total employee compensation from both U.S. and
•
foreign sources was $250,000 or more.
Don't include any interest expense on line 2. See lines 4a
and 4b for special rules for interest expense.
You used an alternative basis (discussed in Pub. 514) to
•
determine the source of the compensation entered on
line 1a.
Lines 3a and 3b
In addition, attach to Form 1116 a statement that contains
the following information.
Some deductions don't definitely relate to either your foreign
source income or your U.S. source income. Enter on lines 3a
and 3b any deductions (other than interest expense) that:
Your name and social security number (written across the
•
top of the statement).
The specific compensation income or the specific fringe
Aren't shown on line 2, and
•
•
Aren't definitely related to your U.S. source income.
•
benefit for which the alternative basis is used.
For each such item, the alternative basis of allocation of
•
Line 3a. Include the following itemized deductions (from
source used.
For each such item, a computation showing how the
Schedule A (Form 1040)) on line 3a.
•
Medical expenses (line 4).
•
•
•
•
alternative allocation was computed.
General sales taxes.
A comparison of the dollar amount of the compensation
•
Real estate taxes for your home.
State and local personal property taxes.
sourced within and without the United States under both the
alternative basis and the time or geographical basis for
determining the source.
If you don't itemize deductions, enter your standard
deduction on line 3a.
Line 3b. Enter on line 3b any other deductions that don't
definitely relate to any specific type of income (for example,
deductions shown on Schedule 1 (Form 1040), Part II,
Adjustments to Income).
You must keep documentation showing why the alternative
basis more properly determines the source of the
compensation.
Lines 2 Through 5—Deductions and Losses
You must reduce your foreign gross income on line 1a by
entering on lines 2 through 5:
Attach a statement listing the separate expenses included
on lines 3a and 3b.
Any of your deductions that definitely relate to that foreign
•
Lines 3d and 3e
income; and
A ratable share of your other deductions that don't
•
For lines 3d and 3e, gross income means the total of your
gross receipts (reduced by cost of goods sold), total capital
and ordinary gains (before subtracting any losses), and all
other income (before subtracting any deductions).
definitely relate to that foreign income, any other foreign
income, or U.S. source income.
If you don't itemize deductions, enter your standard
deduction on line 3a, and don't enter on lines 2 through 5 any
deductions that would have been reported on Schedule A
Line 3d. Enter your gross foreign source income from the
category you checked above Part I of this Form 1116. Include
17
Instructions for Form 1116 (2023)
any foreign earned income you have excluded on Form 2555
but don't include any other exempt income.
If you are a U.S. citizen, resident alien, or a domestic estate,
and your gross foreign source income (including any income
excluded on Form 2555) doesn't exceed $5,000, you can
allocate all of your interest expense to U.S. source income.
Otherwise, each type of interest expense is apportioned
separately using an “asset method.” See Pub. 514 for more
information.
If you had income from more than one country, you must
enter income from only one country in each column.
If you had to adjust your foreign qualified dividends or
capital gains (discussed earlier), include those amounts
without regard to any adjustments.
Line 3e. Enter on line 3e in each column your gross income
from all sources and all categories, both U.S. and foreign.
"Gross income from all sources" is a constant amount (that is,
you will enter the same amount on line 3e for each column of
all Forms 1116 that you file). Include any foreign earned
income you have excluded on Form 2555 but don't include
any other exempt income.
Example. You have investment interest expense of
$2,000. Your assets of $100,000 consist of stock generating
U.S. source income (adjusted basis, $40,000) and stock
generating foreign source income (adjusted basis, $60,000).
You apportion 40% ($40,000/$100,000) of $2,000, or $800,
of your investment interest to U.S. source income and 60%
($60,000/$100,000) of $2,000, or $1,200, to foreign source
income. In this example, you will enter the $1,200
If you are a nonresident alien, include on both lines 3d and
3e your income that isn't effectively connected with a trade or
business in the United States.
apportioned to foreign source income on line 4b. You
wouldn't enter the $800 apportioned to U.S. source income
on any line of Part I of Form 1116.
If you had to adjust your foreign qualified dividends or
capital gains (discussed earlier), include those amounts
without regard to any adjustments.
Line 5
If you have capital losses from foreign sources, see Foreign
Qualified Dividends and Capital Gains (Losses), earlier, for
information on adjustments you may be required to make.
Line 3f
Divide line 3d by line 3e and round off the result to at least
four decimal places (for example, if your result is 0.8756782,
round off to 0.8757, not to 0.876 or 0.88). Enter the result, but
don't enter more than “1.”
Part II—Foreign Taxes Paid or
Accrued
foreign taxes that are eligible for the foreign tax credit
Line 4a
!
CAUTION
and for foreign taxes that aren't eligible for the foreign
tax credit.
If your gross foreign source income (including income
excluded on Form 2555) doesn't exceed $5,000, you can
allocate all of your interest expense to U.S. source income.
Otherwise, deductible home mortgage interest including
points is apportioned using a gross income method. Use the
Worksheet for Home Mortgage Interest to figure the amount
to enter on line 4a.
Generally, you can take a foreign tax credit in the tax year
you paid or accrued the foreign taxes, depending on your
method of accounting. If you report on the cash basis, you
can choose to take the credit for accrued taxes by checking
the “Accrued” box in Part II on a timely filed original return.
You can’t make this choice on an amended return. Once you
choose to do this, you must credit foreign taxes in the year
they accrue on all future returns.
Line 4b
Generally, you must enter in Part II the amount of foreign
taxes, in both the foreign currency denomination(s) and as
converted into U.S. dollars, that relate to the category of
Other interest expense includes investment interest, interest
incurred in a trade or business, and passive activity interest.
Keep for Your Records
Worksheet for Home Mortgage Interest—Line 4a
1. Enter gross foreign source income* of the type shown on Form 1116. Don't enter income
excluded on Form 2555 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.
2.
2. Enter gross income from all sources. Don't enter income excluded on Form 2555 . . . . . . . .
3. Divide line 1 by line 2 and enter the result as a decimal (rounded to at least four
places) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.
4.
4. Enter deductible home mortgage interest (from line 8e of Schedule A (Form 1040)) . . . . . . .
5. Multiply line 4 by line 3. Enter the result here and on the appropriate Form 1116,
line 4a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.
* If you have to report income from more than one country on Form 1116, complete a separate worksheet for each country.
Use only the income from that country on line 1 of the worksheet.
18
Instructions for Form 1116 (2023)
income checked above Part I. Taxes are related to the
income if the income is included in the foreign tax base on
which the tax is imposed. If the foreign tax you paid or
accrued relates to more than one category of income,
apportion the tax among the categories. The apportionment
is based on the ratio of net foreign taxable income in each
category to the total net income subject to the foreign tax.
See Allocation of Foreign Taxes in Pub. 514 for an example.
Enter in Part II the foreign taxes that were previously
suspended under section 909 and that are allowed in 2023
because the related income is taken into account in 2023.
Enter “909 taxes” in column (l) instead of the date paid or
accrued. Complete the other columns as appropriate.
section 951A category income, as carrybacks and carryovers
aren’t allowed for this category of income.
File Form 1040-X or other amended return and a revised
Form 1116 for the earlier tax year to which you are carrying
back excess foreign taxes.
Special rules for carryforwards of pre-2018 unused for-
eign taxes. Unused foreign taxes in the pre-2018 separate
category for general income carried forward are generally
allocated to your post-2017 separate category for general
income. Alternatively, you can allocate those foreign taxes to
the post-2017 separate category for foreign branch category
income to the extent the unused foreign taxes would have
been allocated to your post-2017 separate category for
foreign branch category income, and would have been
unused foreign taxes with respect to that separate category, if
that separate category had applied in the year or years the
unused foreign taxes arose. A simplified safe harbor is also
available for determining the portion of the unused foreign
taxes that may be allocated to the post-2017 separate
category for foreign branch category income. See
If foreign tax paid on passive income is reported to
you in U.S. dollars on a Form 1099-DIV, 1099-INT, or
similar statement, you don't have to convert the
TIP
amount shown into foreign currency. This rule applies
tax credit without filing Form 1116 (as explained earlier).
Enter “1099 taxes” in Part II, column (l), and complete
columns (q) through (u) for each foreign country indicated in
Part I.
Regulations section 1.904-2(j)(1)(iii) for further details.
Restrictions. You can't carry a credit back to a tax year for
which you claimed a deduction, rather than a credit, for
foreign taxes paid or accrued. However, you must reduce the
amount of any carryback or carryforward by the amount that
you would have used had you chosen to claim a credit rather
than a deduction in that year.
without filing Form 1116 (as explained earlier), the following
rules apply.
Note. If you are taking a credit for additional taxes paid or
accrued as the result of an audit by a foreign taxing authority
or you are filing an amended return reflecting a foreign tax
refund, attach a statement to Form 1116 identifying these
taxes.
Part III—Figuring the Credit
Line 10
You can't carry over unused foreign taxes paid or accrued
•
in a year to which the election doesn't apply to or from any
year for which you made the election.
Enter the unused foreign taxes in the separate category from
another tax year that are eligible to be carried forward to or
back to 2023. The amount of foreign taxes carried forward to
the current tax year is the amount from Schedule B (Form
1116), line 3, column (xiv). Attach Schedule B (Form 1116) to
your Form 1116 for each applicable separate category of
income if you enter a carryover of foreign taxes from a prior
tax year on Form 1116, line 10, or if you generated a foreign
tax carryover in the current year. You don't need to file
Schedule B (Form 1116) for 2023 if you carry back a foreign
tax to 2023, and don't otherwise need to file Schedule B
(Form 1116). See the Instructions for Schedule B (Form
1116) for more information.
The carryback-carryforward period isn't extended if you
•
are unable to use a carryback or carryforward because you
made the election.
Don't reduce the carryback or carryforward by the amount
•
you would have used in the election year if you hadn't made
the election.
More information. See Pub. 514 for more information on
carryback and carryforward provisions, including examples.
Line 12
You may have to reduce the foreign taxes you paid or
accrued by the following items.
Taxes on income excluded on Form 2555. Reduce
•
If you enter an amount on line 10 and you don't need
taxes paid or accrued by the taxes allocable to any foreign
earned income excluded on Form 2555. If only part of your
foreign earned income is excluded, you must determine the
amount of tax allocable to excluded income. To do so,
multiply the foreign taxes paid or accrued on foreign earned
income received or accrued during the tax year by the
following fraction.
to attach Schedule B, check the box on line 10.
TIP
You can carry back 1 year and then forward 10 years any
foreign tax you paid or accrued to any foreign country or U.S.
income in a separate category that is more than the
limitation. First, apply the excess to the earliest year to which
it may be carried. Then, apply it to the next earliest year, and
so on. The carryback-carryforward period can't be extended
even if you are unable to take a credit in 1 of the intervening
years.
Special rules apply to the carryback and carryforward of
foreign taxes paid or accrued on foreign oil and gas income.
See section 907(f).
No foreign tax carryovers are allowed for foreign taxes
paid or accrued on section 951A category income. Leave
line 10 of Form 1116 blank if you complete a Form 1116 for
Numerator: Foreign earned income and housing amounts
you excluded for the tax year minus otherwise deductible
expenses (not including the foreign housing deduction)
allocable to that income.
Denominator: Your total foreign earned income received or
accrued during the tax year minus deductible expenses
(including the foreign housing deduction) allocable to that
income. However, if the foreign jurisdiction charges tax on
foreign earned income and some other income (for example,
earned income from U.S. sources or a type of income not
subject to U.S. tax) and the taxes on the other income can't
19
Instructions for Form 1116 (2023)
be segregated, the denominator is the total amount of
income subject to foreign tax minus deductible expenses
allocable to that income.
activities. If you can figure the taxes specifically attributable to
boycott operations, enter the amount on line 12. If you can't
figure the amount of taxes specifically attributable to boycott
operations, multiply the credit otherwise allowable by the
international boycott factor (figured on Schedule A (Form
5713), International Boycott Factor) and enter the result on
Form 1116, line 34. Attach a statement to Form 1116
showing in detail how you figured the reduction.
Taxes on income from Puerto Rico exempt from U.S.
•
tax. The reduction applies if you have income from Puerto
Rican sources that isn't taxable on your U.S. tax return. To
figure the credit, reduce your foreign taxes paid or accrued by
the taxes allocable to the exempt income. See Pub. 570 for
more information.
For more information, see Form 5713 and its instructions.
Taxes on income from American Samoa excluded on
•
Form 4563. If you are a bona fide resident of American
Samoa, reduce taxes paid or accrued by any taxes
attributable to income from sources in American Samoa
excluded on Form 4563. For more information, see Pub. 570.
Taxes related to a foreign tax credit splitting event.
•
Reduce taxes paid or accrued by any taxes paid or accrued
with respect to a foreign tax credit splitting event. If there is a
foreign tax credit splitting event, you may not take the foreign
tax into account before the tax year in which you take the
income into account. There is a foreign tax credit splitting
event with respect to a foreign income tax if the related
income is (or will be) taken into account by a covered person.
A covered person is either of the following.
Taxes on combined foreign oil and gas income.
•
Reduce taxes paid or accrued by a portion of taxes imposed
on combined foreign oil and gas income. The amount of the
reduction is the amount by which your foreign oil and gas
taxes exceed the amount of your combined foreign oil and
gas income for the year multiplied by a fraction equal to your
pre-credit U.S. tax liability divided by your worldwide taxable
income. You may be entitled to carry over to other years taxes
reduced under this rule. See section 907(f).
1. An entity in which you hold, directly or indirectly, at
least a 10% ownership interest (determined by vote or value).
2. Any person who is related to you. For a list of related
persons, see Nondeductible Loss in chapter 2 of Pub. 544.
Combined foreign oil and gas income is the sum of foreign
oil-related income and foreign oil and gas extraction income.
Foreign oil and gas taxes are the sum of foreign oil and gas
extraction taxes and foreign oil-related taxes.
A covered asset acquisition under section 901(m) isn't a
foreign tax credit splitting event under section 909.
For more information, see section 909 and the regulations
under that section.
Taxes on foreign mineral income. Reduce taxes paid or
•
accrued on mineral income from a foreign country or U.S.
possession if you took a deduction for percentage depletion
under section 613 for any part of the mineral income.
Line 13
Reduction for failure to file Form 5471. U.S.
You must adjust the foreign taxes paid or accrued if they
relate to passive income that is treated as other category
income because it is high taxed. On your Form 1116 for
passive category income, enter as a negative number (in
parentheses) the amount of your foreign taxes that relate to
that income. On your Form 1116 for the other category
income, enter as a positive number the amount of foreign
taxes that relate to that income.
•
shareholders who control a foreign corporation must file Form
5471, Information Return of U.S. Persons With Respect To
Certain Foreign Corporations. If you don't file Form 5471 and
furnish all of the information required by the due date of your
tax return, reduce by 10% all foreign taxes that you may
otherwise take into account for the foreign tax credit. You may
have to make additional reductions if the failure continues.
See section 6038(c) and Regulations section 1.6038-2(k) for
details and exceptions.
Line 15
The amount on line 15 is your taxable income (or loss),
before adjustments, from sources outside the United States.
If the amount on line 15 is zero or a loss, you generally have
no foreign tax credit for the category of income checked
above Part I of this Form 1116. However, you must complete
line 16 and continue with the form even if line 15 is zero or a
loss.
Note. The reduction in foreign taxes is reduced by any dollar
penalty imposed under section 6038(b).
Reduction for failure to file Form 8865. U.S. partners
•
who control a foreign partnership must file Form 8865, Return
of U.S. Persons With Respect to Certain Foreign
Partnerships. If you don't file Form 8865 and furnish all of the
information required by the due date of your tax return,
reduce by 10% all foreign taxes that you may otherwise take
into account for the foreign tax credit. You may have to make
additional reductions if the failure continues. See section
6038(c) and Regulations section 1.6038-3(k) for details and
exceptions.
Line 16
You are required to increase or decrease the amount on
line 15 by the following adjustments. The adjustments must
be made in the order listed. If you have more than one
adjustment, enter the net adjustment on line 16 and attach a
detailed statement showing your computation. See Pub. 514
for more details on these adjustments.
Note. The reduction in foreign taxes is reduced by any dollar
penalty imposed under section 6038(b).
The adjustments are as follows.
1. Adjustment for disallowed business loss under sec-
tion 461(l). Increase the amount on line 15 by the amount of
any business loss that is disallowed under section 461(l) to
the extent it is attributable to the separate category of income
of the applicable Form 1116. For purposes of adjustments 2–
6 described below, any reference to an amount on line 15
shall mean the amount on line 15 after taking into account
this adjustment for disallowed business loss.
Reduction of taxes or credit due to international
•
boycott operations. In general, if you agree to participate in,
or cooperate with, an international boycott, you must file
Form 5713, International Boycott Report, and attach all
supporting schedules. In addition, you must reduce either the
total taxes available for credit or the credit otherwise
allowable by your foreign taxes resulting from boycott
20
Instructions for Form 1116 (2023)
2. Allocation of foreign losses. If you have a loss on
line 15 of one Form 1116 and you have income on line 15 of
one or more other Forms 1116, you must reduce the foreign
income by a pro rata share of the loss before you use any
remaining loss to reduce U.S. source income.
If the loss reduces foreign source income, you must
create, or increase the balance in, a separate limitation loss
account and you must recharacterize the income you receive
in the loss category in later years. See 5. Recapture of
separate limitation loss accounts, later. In situations where
the loss to be allocated exceeds foreign income in other
categories:
3. Allocation of U.S. losses. If you have a net loss from
U.S. sources, proportionately allocate that loss among the
separate categories of your foreign income. Reduce the
income on line 15 (adjusted by any allocation of losses, as
including (in parentheses) on line 16 the allocable portion of
any U.S. loss. In later years, you will be allowed to treat part
of your U.S. source income as foreign source income.
A U.S. loss includes a rental loss on property located in
the United States. If you have any qualified dividends or
capital gains (including capital gain distributions) or losses for
the tax year and you are required to make any adjustments to
those amounts, as explained under Foreign Qualified
Dividends and Capital Gains (Losses), earlier, or in the
instructions for line 18, the amount of your U.S. loss is the
excess of:
The excess reduces U.S. source income (as modified
•
You must create, or increase the balance in, an overall
•
foreign loss account; and
For later years, you must follow the rules described under
•
a. The total of the amounts entered on line 15 for each
Form 1116 you are filing, over
If the loss in one category reduces foreign source income
in another category and that second category has a separate
limitation loss account with respect to the first category, then
the two offsetting separate limitation loss account balances
are netted for purposes of determining the amount of income
in either category that is subject to recharacterization under
Capital losses. In determining your U.S. source income,
reduce the amount of any capital losses from U.S. sources by
losses from U.S. sources and you didn't use either Worksheet
A or Worksheet B, see Pub. 514 to determine your U.S.
source income.
b. The amount entered on line 18 of the Form 1116.
You allocate the net loss to a separate category of income
by multiplying the net loss by a fraction. The numerator of the
fraction is the foreign source income in a separate category,
and the denominator is the total foreign source income in all
separate categories.
4. Recapture of prior year overall foreign loss accounts.
If you had an overall foreign loss in a prior year that offset
U.S. source income, a part of your foreign income (in the
same category as the loss) is recharacterized as U.S. source
income in each following tax year.
The part of your total foreign income subject to
recharacterization is the lesser of the following.
Example. For 2023, you completed three Forms 1116.
The first had a loss from general category income of $2,000
on line 15, the second had passive category income of
$4,000 on line 15, and the third had income of $1,000 from
the certain income re-sourced by treaty category on line 15.
You must allocate the $2,000 loss between the passive
category income and the certain income re-sourced by treaty
category in the same proportion as each category's income
bears to the total foreign income.
The amount of the loss that would reduce passive
category income would be 80% ($4,000/$5,000) of the
$2,000 loss, or $1,600. Include the $1,600 (in parentheses)
on line 16 of the passive category income Form 1116.
Assuming you have no other line 16 adjustments, enter
$2,400 ($4,000 − $1,600) on line 17 of that form.
The amount of the loss that would reduce the certain
income re-sourced by treaty would be 20% ($1,000/$5,000)
of the $2,000 loss, or $400. Include the $400 (in
parentheses) on line 16 of the certain income re-sourced by
treaty Form 1116. Assuming you have no other line 16
adjustments, enter $600 ($1,000 − $400) on line 17 of that
form.
In this case, all of the $2,000 loss was allocated between
the foreign source passive category income and the certain
income re-sourced by treaty category, and no reduction was
made to U.S. source income.
a. The total amount of maximum potential recapture in all
overall foreign loss accounts. The maximum potential
recapture in any account for a category is the lesser of:
i. The current year taxable income from foreign sources in
that category (the amount from line 15, less any adjustment
for allocation of losses, as described earlier under 2.
for that category); or
ii. The balance in the overall foreign loss account for that
category.
b. 50% (or more, if you choose) of your total taxable
income from foreign sources.
If the total foreign income subject to recharacterization is
the amount described in (a), earlier, then for each separate
category the recapture amount is the maximum potential
recapture amount for that category. If the total foreign income
subject to recharacterization is the amount described in (b)
above, then for each separate category the recapture amount
is computed by multiplying the total recapture amount by the
following fraction:
Maximum potential recapture amount for the overall foreign loss
account in the separate category
Total amount of maximum potential recapture in all overall
foreign loss accounts
If you receive general category income in a later year, you
must recharacterize all or part of that income as passive
category income and certain income re-sourced by treaty in
that later year. See the example under 5. Recapture of
Reduce the amount on line 15 by including (in
parentheses) on line 16 the amount of the recapture for the
category checked above Part I, as determined above. Be
sure to attach your computation. If you elect to recapture
21
Instructions for Form 1116 (2023)
more of an overall foreign loss than is required ((b) above),
show in your computation the percentage of taxable income
recharacterized and the dollar amount recharacterized.
income must be recharacterized as passive category income.
Similarly, $400 of the general category income must be
recharacterized as certain income re-sourced by treaty. On
your 2024 Form 1116 for passive category income, you
would include $1,600 on line 16. On your 2024 Form 1116 for
certain income re-sourced by treaty, you would include $400
on line 16. On your 2024 Form 1116 for general category
income, you would include ($2,000) on line 16.
Attach a statement to Form 1116 showing the balance in
each separate category overall foreign loss account. See
Regulations section 1.904(f)-1(b) for more information.
Dispositions of certain property. If you generated
foreign source gain in the same category as the overall
foreign loss on a disposition of property that was used
predominantly in a foreign trade or business and that
generated foreign source income in the same category as the
overall foreign loss, then the gain on the disposition may be
subject to recharacterization as U.S. source income to the
extent of 100% of your foreign source taxable income. This is
true whether or not you would otherwise recognize gain on
the disposition. See section 904(f)(3).
Recharacterizing income from a separate category
doesn't result in recharacterizing any tax.
TIP
6. Recapture of overall domestic loss accounts. If you
have an overall domestic loss for any tax year beginning after
2006, you must create, or increase the balance in, an overall
domestic loss account and you must recharacterize a portion
of your U.S. source taxable income as foreign source taxable
income in succeeding years for purposes of the foreign tax
credit.
The above rule also generally applies to a gain on the
disposition of stock in a CFC, if you owned more than 50%
(by vote or value) of the stock right before you disposed of it.
See section 904(f)(3)(D) for more information and
exceptions.
The part that is treated as foreign source taxable income
for the tax year is the smaller of:
The total balance in your overall domestic loss account in
•
Reduce line 15 by including (in parentheses) on line 16
each separate category (less amounts recaptured in earlier
years), or
the smallest of:
a. The amount of the gain not recaptured above;
50% of your U.S. source taxable income for the tax year.
•
b. The remaining amount of the overall foreign loss not
Under the Tax Cuts and Jobs Act, section 904(g)(5)
recaptured in earlier years or in the current year; or
allows for an election to recapture up to 100% of any
!
CAUTION
pre-2018 unused overall domestic loss from a prior
c. The amount from line 15 (less any adjustment for
allocation of losses, as described earlier under 2. Allocation
adjustment for any recapture above).
See Pub. 514 if you disposed of property described above
and you recognized foreign source gain in a different
category than the overall foreign loss, you recognized U.S.
source gain, or you didn't recognize gain.
5. Recapture of separate limitation loss accounts. If, in a
prior tax year, you reduced your foreign taxable income in the
category checked above Part I by a pro rata share of a loss
from another category, you must recharacterize in 2023 all or
part of any income you receive in 2023 in that loss category.
If you have separate limitation loss accounts in the loss
category relating to more than one other category and the
total balances in those loss accounts exceed the income you
receive in 2023 in the loss category, then income in the loss
category is recharacterized as income in those other
categories in proportion to the balances of the separate
limitation loss accounts for those other categories. You
recharacterize the income by:
year, as opposed to the 50% stated in the previous
paragraph. This election is applicable for any tax year
beginning after December 31, 2017, and before January 1,
2028.
You must establish and maintain separate overall
domestic loss accounts for each separate category in which
foreign source income is offset by the domestic loss. The
balance in each overall domestic loss account is the amount
of the overall domestic loss subject to recapture. The
recharacterized income is allocated among and increases
foreign source income in separate categories in proportion to
the balances of the overall domestic loss accounts for those
separate categories. You increase the amount on line 15 (as
adjusted by any of the other adjustments previously
mentioned in these line 16 instructions) of the Form 1116 for
each of the separate categories to which the recharacterized
income is allocated.
Overall domestic loss defined. In a tax year in which
you choose to claim the foreign tax credit, the overall
domestic loss is the domestic loss for that tax year to the
extent that it offsets foreign source taxable income for that tax
year or for any preceding tax year (in which you choose to
claim the foreign tax credit) because of a carryback. If you
don't choose to claim the foreign tax credit for a tax year, the
overall domestic loss is the domestic loss for that tax year to
the extent that it offsets foreign source taxable income for any
preceding tax year (in which you chose to claim the foreign
tax credit) because of a carryback.
Increasing the amount on line 15 (adjusted by any of the
•
other adjustments previously mentioned in these line 16
instructions) of the Form 1116 for each of the separate
categories, other than the loss category, previously reduced
by including on line 16 any recharacterized income; and
Decreasing the amount on line 15 (adjusted by any of the
•
other adjustments previously mentioned in these line 16
instructions) of the Form 1116 for the loss category by
including on line 16 the amount of recharacterized income as
a negative number (in parentheses).
Domestic loss. A domestic loss is the amount by which
the U.S. source gross income for the tax year is exceeded by
the sum of the expenses, losses, and other deductions
properly allocated or apportioned to that income. Determine
this amount by taking into account any net operating loss
carried forward from a prior tax year (but not any loss carried
back). If you have any capital gains or losses, take them into
account after any adjustments required under Foreign
2. Allocation of foreign losses, earlier, in the next year (2024),
you have $5,000 of general category income, $3,000 of
passive category income, and $500 of certain income
re-sourced by treaty. Because $1,600 of the general category
income loss was used to reduce your passive category
income in 2023, $1,600 of your 2024 general category
22
Instructions for Form 1116 (2023)
Worksheet for Line 18 (Worldwide Qualified Dividends and Capital
Gains)
Keep for Your Records
!
CAUTION
1. Individuals: Enter the amount from Form 1040, 1040-SR, or 1040-NR, line 15.
Estates and trusts: Enter taxable income without the deduction for your exemption . . . . . . . 1.
2. Enter your worldwide 28% gains. See instructions . . . . . . . . . . . . . .
3. Multiply line 2 by 0.2432 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Enter your worldwide 25% gains. See instructions . . . . . . . . . . . . . .
5. Multiply line 4 by 0.3243 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
3.
4.
5.
6. Enter your worldwide 20% gains and qualified dividends. See
instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.
7.
7. Multiply line 6 by 0.4595 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Enter your worldwide 15% gains and qualified dividends. See
instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.
9.
9. Multiply line 8 by 0.5946 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Enter your worldwide 0% gains and qualified dividends. See
instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.
11. Add lines 3, 5, 7, 9, and 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.
12. Subtract line 11 from line 1. Enter the result here and on Form 1116, line 18 . . . . . . . . . . . . . . . 12.
If you aren't required to complete the Worksheet for
Line 18
Line 18 or you qualify for the adjustment exception and elect
not to adjust your qualified dividends and capital gains, enter
on line 18 of Form 1116 your taxable income from Form
1040, 1040-SR, or 1040-NR, line 15.
If you have qualified dividends or capital gains, you may be
required to make adjustments to those qualified dividends
and gains before you take those amounts into account on
line 18.
You qualify for the adjustment exception if you meet both
of the following requirements.
Individuals Who Completed a Qualified Dividends
and Capital Gain Tax Worksheet
1. Line 5 of the Qualified Dividends and Capital Gain Tax
Worksheet doesn't exceed:
If you completed the Qualified Dividends and Capital Gain
Tax Worksheet in the Instructions for Form 1040, you must
on line 18 if:
a. $364,200 if married filing jointly or qualifying surviving
spouse,
b. $182,100 if married filing separately,
c. $182,100 if single, or
d. $182,100 if head of household.
1. Line 5 of your Qualified Dividends and Capital Gain
Tax Worksheet is greater than zero, and
2. The amount of your foreign source net capital gain,
plus the amount of your foreign source qualified dividends, is
less than $20,000.
2. Line 23 of your Qualified Dividends and Capital Gain
Tax Worksheet is less than line 24 of that worksheet.
Adjustment exception. If you qualify for the adjustment
exception, you can elect not to adjust your qualified dividends
and capital gains. You make this election by not completing
have any foreign qualified dividends or foreign capital gains
(or losses) and you chose not to make any adjustments to
those amounts when you completed lines 1a and 5. You can't
make this election if you have any foreign qualified dividends
or foreign capital gains (or losses) and you made
If you are subject to the alternative minimum tax, see the
special rules in Regulations section 1.904(b)-1(b)(3).
Your foreign source net capital gain is the excess of
your foreign source net long-term capital gain over
your foreign source net short-term capital loss.
TIP
Completing the Worksheet for Line 18. If you do need to
Lines 2 through 5. Skip these lines.
Line 6. Enter the amount from line 20 of the Qualified
Dividends and Capital Gain Tax Worksheet.
adjustments to those amounts when you completed lines 1a
and 5. In this case, complete the Worksheet for Line 18.
23
Instructions for Form 1116 (2023)
Line 8. Enter the amount from line 17 of the Qualified
Dividends and Capital Gain Tax Worksheet.
Form 1040, 1040-SR, or 1040-NR filers. You must use the
Worksheet for Line 18 to figure the amount of tax to enter on
line 18 of Form 1116 if:
Line 10. Enter the amount from line 9 of the Qualified
Dividends and Capital Gain Tax Worksheet.
Line 18 of the Schedule D Tax Worksheet is greater than
•
zero, and
Complete all other lines as instructed on the worksheet.
Line 45 of the Schedule D Tax Worksheet is less than
•
line 46.
Estates and Trusts That Completed a Qualified
Dividends Tax Worksheet or Schedule D
to figure the amount of tax to enter on line 18 of Form 1116 if:
Line 17a of the Schedule D Tax Worksheet is greater than
•
If you completed the Qualified Dividends Tax Worksheet in
the Instructions for Form 1041 or you completed Part V of
Schedule D (Form 1041), you must use the Worksheet for
Line 18 to figure the amount to enter on line 18 if:
1. You figured your tax using the Qualified Dividends Tax
Worksheet, line 5 of that worksheet is greater than zero, and
line 21 of that worksheet is less than line 22; or
2. You figured your tax using Part V of Schedule D (Form
1041), line 27 of Schedule D is greater than zero, and line 43
of Schedule D is less than line 44.
zero, and
Line 42 of the Schedule D Tax Worksheet is less than
•
line 43.
Adjustment exception. If you qualify for the adjustment
exception, you can elect not to adjust your qualified dividends
and capital gains. You make this election by not completing
have any foreign qualified dividends or foreign capital gains
(or losses) and you chose not to make any adjustments to
those amounts when you completed lines 1a and 5. You can't
make this election if you have any foreign qualified dividends
or foreign capital gains (or losses) and you made
Adjustment exception. If you qualify for the adjustment
exception, you can elect not to adjust your qualified dividends
and capital gains. You make this election by not completing
have any foreign qualified dividends or foreign capital gains
(or losses) and you chose not to make any adjustments to
those amounts when you completed lines 1a and 5. You can't
make this election if you have any foreign qualified dividends
or foreign capital gains (or losses) and you made
adjustments to those amounts when you completed lines 1a
You qualify for the adjustment exception if:
1. The amount of your foreign source qualified dividends,
plus the amount of your foreign source net capital gain, is
less than $20,000; and
2. Line 18 of the Schedule D Tax Worksheet in the
Schedule D (Form 1040) instructions is less than or equal to:
adjustments to those amounts when you completed lines 1a
and 5. In this case, complete the Worksheet for Line 18. See
section 904(b) and the regulations issued under that Code
section to determine if you qualify for the adjustment
exception.
a. $364,200 if married filing jointly or qualifying surviving
spouse,
b. $182,100 if married filing separately,
c. $182,100 if single, or
d. $182,100 if head of household.
Your foreign source net capital gain is the excess of
your foreign source net long-term capital gain over
your foreign source net short-term capital loss.
TIP
(Or, for trusts and estates, see section 904(b) and the
regulations issued under that Code section to determine if
you qualify for the adjustment exception.)
If you aren't required to complete the Worksheet for
Line 18 or you qualify for the adjustment exception and elect
not to adjust your qualified dividends and capital gains, enter
on line 18 of Form 1116 the estate's or trust's taxable income
without the deduction for its exemption.
Completing the Worksheet for Line 18. If you do need to
Lines 2 through 5. Skip these lines.
Line 6. Enter the amount from line 18 of the Qualified
Dividends Tax Worksheet or line 40 of Schedule D.
Line 8. Enter the amount from line 14 of the Qualified
Dividends Tax Worksheet or line 36 of Schedule D.
Line 10. Enter the amount from line 8 of the Qualified
Dividends Tax Worksheet or line 30 of Schedule D.
If you are subject to the alternative minimum tax, see the
special rules in Regulations section 1.904(b)-1(b)(3).
Your foreign source net capital gain is the excess of
your foreign source net long-term capital gain over
your foreign source net short-term capital loss. Ignore
TIP
any foreign source qualified dividends or capital gains that
you elected to include on Form 4952, line 4g, in determining
the amount of your foreign source qualified dividends and net
capital gain.
If you aren't required to complete the Worksheet for
Line 18 or you qualify for the adjustment exception and elect
not to adjust your qualified dividends and capital gains, enter
on line 18 of Form 1116 your taxable income without the
deduction for your exemption (for example, the amount from
Form 1040, 1040-SR, or 1040-NR, line 15).
Complete all other lines as instructed on the worksheet.
Taxpayers Who Completed the Schedule D Tax
Worksheet
the following.
Line 2. Enter the amount (if any) from line 42 of the
Schedule D Tax Worksheet in the Schedule D (Form 1040)
instructions or line 39 of the Schedule D Tax Worksheet in the
Schedule D (Form 1041) instructions.
Line 4. Enter the amount (if any) from line 39 of the
Schedule D Tax Worksheet in the Schedule D (Form 1040)
If you figured your tax using the Schedule D Tax Worksheet
(in the Schedule D (Form 1040) instructions or in the
Schedule D (Form 1041) instructions), you may have to use
on line 18 of Form 1116.
24
Instructions for Form 1116 (2023)
instructions or line 36 of the Schedule D Tax Worksheet in the
Schedule D (Form 1041) instructions.
Line 6. Enter the amount (if any) from line 33 of the
Schedule D Tax Worksheet in the Schedule D (Form 1040)
instructions or line 30 of the Schedule D Tax Worksheet in the
Schedule D (Form 1041) instructions.
tax with respect to that distribution, you may be eligible for an
increase in your foreign tax credit limitation under section
960(c). Report on line 22 any such increase in limitation. See
section 960(c) and Regulations section 1.960-4 for more
details to determine if you are available for an increase in
limitation.
Line 8. Enter the amount (if any) from line 30 of the
Schedule D Tax Worksheet in the Schedule D (Form 1040)
instructions or line 26 of the Schedule D Tax Worksheet in the
Schedule D (Form 1041) instructions.
Line 10. Enter the amount (if any) from line 22 of the
Schedule D Tax Worksheet in the Schedule D (Form 1040)
instructions or line 19 of the Schedule D Tax Worksheet in the
Schedule D (Form 1041) instructions.
Line 24
The maximum foreign tax credit you can claim in the current
year is generally limited to the allocated amount of U.S. tax
imposed on the foreign income, or the actual amount of
foreign tax paid or accrued on the foreign income (after
reductions required on line 12), whichever is less. However,
information.
Complete all other lines as instructed on the worksheet.
If the amount on line 23 is smaller than the amount on
line 14, see Pub. 514 for more information on carryback and
carryforward provisions, including examples.
Line 20
If you are completing line 20 for separate category g
(lump-sum distributions), enter the amount from line 5 of the
Part IV—Summary of Credits From
Separate Parts III
Don't complete line 20 for separate category e (section
Complete lines 25 through 31 in Part IV only if you must
complete more than one Form 1116 because you have more
than one of the categories of income listed above Part I.
For all other applicable categories, complete line 20 as
follows.
Complete Part IV on only one Form 1116 (the one with the
largest amount entered on line 24) to summarize the credits
you figured on all of your Forms 1116. However, see
Exception below. Enter the credits from line 24 of all of your
Forms 1116 on lines 25 through 31 of the Form 1116 you are
using to summarize your credits. File the other Forms 1116
as attachments.
Exception. If you completed a Form 1116 for category g
(lump-sum distributions) or e (section 901(j) income), don't
use Part IV of that Form 1116 as your summary, unless you
are filing both a Form 1116 for category g and a Form 1116
for category e but no other category.
Individuals. Enter the total of Form 1040, 1040-SR, or
1040-NR, line 16, and Schedule 2 (Form 1040), Part I, line 2,
less any tax included on line 16 from Form 4972.
Estates and trusts.
Form 1041 filers. Enter the amount from Form 1041,
•
Schedule G, line 1a.
Form 990-T filers. Enter the total of Form 990-T, Part II,
•
lines 2, 3, 4, and 6. However, don't include any taxes listed in
section 26(b) that are included in Part II, line 4. For example,
don't include the base erosion minimum tax under section
59A, and the tax and interest on a nonqualified withdrawal
from a capital construction fund (section 7518).
Form 1040-NR filers. Enter the amount from Form
•
Line 33
1040-NR, line 16, less any tax included on line 16 of Form
1040-NR from Form 4972.
Enter the smaller of line 20 or line 32.
You may need to adjust the amount you report on Form
1116, line 20, by the amounts reported on Form 8978,
line 14. If you file Form 8978, Partner’s Additional Reporting
Year Tax, you will need to increase or decrease the amount
you report on Form 1116, line 20, by the amount of any
positive or negative tax from Form 8978, line 14, that you
report on your tax return and that isn’t already included on the
lines specified earlier. For example, for Form 1040, a positive
Form 8978 adjustment is already included in the tax reported
on Form 1040, line 16, while a negative tax adjustment is not.
If after your adjustment, the amount of your tax is zero or less,
enter -0- on Form 1116, line 20. If any additional guidance is
provided related to reporting amounts from Form 8978 on
Developments.
Note. Generally, line 32 will exceed line 20 only if you have
U.S. capital gains or qualified dividends that are subject to
the capital gain rate differential (figured in the Worksheet for
Line 18).
Schedule B (Form 1116) and Schedule C (Form
1116)
See the separate instructions for Schedule B (Form 1116)
and Schedule C (Form 1116) to see if you must file these
schedules.
Paperwork Reduction Act Notice. We ask for the
information on this form to carry out the Internal Revenue
laws of the United States. You are required to give us the
information. We need it to ensure that you are complying with
these laws and to allow us to figure and collect the right
amount of tax.
Line 22
If you have included in gross income an amount of income of
a controlled foreign corporation (CFC) in prior years under
section 951(a), you may have established an excess
You aren't required to provide the information requested
on a form that is subject to the Paperwork Reduction Act
unless the form displays a valid OMB control number. Books
or records relating to a form or its instructions must be
retained as long as their contents may become material in the
administration of any Internal Revenue law. Generally, tax
limitation account under section 960(c). If that is the case and
you receive a distribution of previously taxed earnings of the
CFC in the current year that are excluded from your gross
income under section 959(a) and you paid or accrued foreign
25
Instructions for Form 1116 (2023)
returns and return information are confidential, as required by
section 6103.
about the law or the form, 1 hr., 1 min.; Preparing the
form, 1 hr., 42 min.; Copying, assembling, and sending
the form to the IRS, 34 min.
The time needed to complete and file this form will vary
depending on individual circumstances. The estimated
burden for individual taxpayers filing this form is approved
under OMB control number 1545-0074 and is included in the
estimates shown in the instructions for their individual income
tax return. The estimated burden for all other taxpayers who
file this form is Recordkeeping, 2 hr., 43 min.; Learning
If you have comments concerning the accuracy of these
time estimates or suggestions for making this form simpler,
we would be happy to hear from you. You can write to the IRS
at the address listed in the instructions of the tax return with
which this form is filed.
26
Instructions for Form 1116 (2023)